Video: Reviving Social Security reform

By Tom Curry National affairs writer
updated 6/22/2005 7:30:53 PM ET 2005-06-22T23:30:53

A group of House Republicans unveiled a Social Security redesign measure Wednesday with a private retirement accounts provision that would be funded through the excess revenues now flowing into the Social Security system.

The proposal differs from one that President Bush has been seeking for months, which would be funded by workers’ choosing to divert some of their tax payments into private accounts.

In 2004, Social Security, which operates on a pay-as-you-go basis, collected $145 billion in excess revenues not needed to pay that year’s benefits.

Two leading Senate Democrats immediately warned of a "bait-and-switch" plan by Republicans.

Sen. Max Baucus, D-Mont., the senior Democrat on the Finance Committee, which has jurisdiction over Social Security, and Sen. Charles Schumer of New York, who also serves on the Finance Committee, voiced their fears Wednesday that Bush and his allies in Congress would win private retirement accounts in the end by wrapping them in a glimmering package which would include tax breaks, retirement savings incentives, and perhaps pension reforms.

Too hard to resist?
That package might well be too hard for some senators, perhaps even some Democrats, to resist, they indicated.

Baucus and Schumer both warned that Republicans would introduce private accounts late in the legislative process — after both the House passes its bill and the Senate passes its version.

As House and Senate negotiators meet in a conference committee to reconcile the two versions, the Democrats said, Republicans could insert the private accounts provision in the “conference report,” the final form of the legislation, which could not be amended and which both the House and Senate would vote on.

When a reporter asked whether Senate Democrats couldn’t simply vote "no" on the conference report if it included private accounts, Baucus berated the reporter.

Difficult to vote 'no'
Would enough Democrats, Baucus asked, really vote against "a whole package that includes 15 billion other things in it, that might also have private accounts? Come on! Come on! Ask an intelligent question, not a naive question!"

Schumer added, referring to the Democrats who voted for the Bush-supported Medicare prescription drug bill that Congress passed in 2003, “What happened with prescription drugs? We didn’t have the votes” to defeat it.

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Eleven Senate Democrats, including Baucus, voted for the 2003 prescription drug bill and it passed by a 54-to-44 vote.

“You can’t amend a conference report,” Schumer reminded reporters. Once private accounts got into a conference report, the provision would be impossible to remove.

At the same time, Schumer insisted, “Democrats are unified on Social Security as we have been on no other issue for a long time. There’s not a crack in the wall, there’s not even the slightest little fracture in the wall.”

Despite that depiction of unity, the comments by Baucus and Schumer revealed a deep concern on their part that some Democrats might end up voting for a larger tax-pension reform-Social Security package that would include some version of private accounts.

Baucus said a bill to be offered in the next few days by Sen. Robert Bennett, R-Utah, also “is part of a bait-and-switch strategy.”

Bennett’s bill would change the initial benefit formula to slow the growth in benefits for upper-income people.

DeMint sees progress
Sen. Jim DeMint, R-S.C., plans to offer legislation Thursday that would mirror the House Republicans’ idea of using excess Social Security revenues to pay for private accounts.

“I’m very happy that Republicans in the House and Senate are uniting to stop the secret raid on Social Security,” DeMint said in a statement Wednesday. “This advances the most important principle of long-term reform: Social Security money must be used for Social Security. Americans are outraged over the raid, and they want it to stop now.”

Under current budget practices, excess Social Security revenue is used to pay for other federal programs and can not be “saved” for the future.

One problem with the concept of using excess revenues to pay for private accounts is that the excess will dry up by 2017 due to a diminishing number of workers compared with the ever-growing number of retirees.

Centrist Democrat still ‘shopping’
One centrist Democrat, Sen. Ben Nelson of Nebraska, said Wednesday that “everybody is still window shopping.… But I think the most interesting question right now about the future of Social Security comes with the DeMint proposal and whether that’s an exit scenario,” a way for Bush to back out of what might be a no-win situation.

Asked what he thought of the substance of DeMint’s proposal, Nelson said, “We’re looking at it.”

Baucus said that the Americans would not hold his party to blame if Congress did not enact a plan to re-design Social Security and avert its insolvency.

According to the trustees of the Social Security system, starting in 2041 (when today’s 30-year-old workers are retired) the system as currently designed will be able to pay only 74 percent of scheduled benefits, in effect a 26 percent cut in retiree benefits. That cut will grow larger each year after 2041.

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