Presidential candidates on Social Security

Author: S.V. Date

Published: October 8, 2004

President Bush calls it part of his "ownership society," the idea that workers should be able to put a portion of their Social Security taxes into investment accounts under their control.

He touts it as a way of creating more retirement money for people than the federal government can provide.

How much would it cost?

Bush doesn't give a figure in his campaign appearances, but according to outside economists, the price tag would be about $2 trillion during the first 10 years - an amount that, unless taxes are raised, would be added to the already ballooning deficits.

The costs arise because Social Security taxes have been used for years to pay benefits for current retirees, rather than being set aside for the generation that actually paid them.

To let today's workforce put a portion of their taxes into individual accounts means there's that much less available to pay today's retirees - so the government either has to cut benefits, raise taxes or borrow the difference.

Bush has promised not to cut benefits or raise taxes, leaving him with only one option, said Len Burman, an economist with the Tax Policy Center, affiliated with the Urban Institute and the Brookings Institution.

U.S. Rep. Clay Shaw, R-Fort Lauderdale, a member of commissions that have studied the issue, said it was not fair to look at just the near-term costs.

"Over 75 years, it actually produces a surplus," he said.

Democrat John Kerry, in his campaign appearances, says Bush's proposal is an attempt "to privatize Social Security" and divert fees and commissions worth nearly $1 trillion during those 75 years to the brokerage and financial services firms that back Bush's campaign.

James Glassman, an economist at the American Enterprise Institute, defended Bush's plan, claiming that such a sweeping proposal can be pushed only in a second presidential term. He said former President Clinton would have pushed it, had he not been sidetracked by the Monica Lewinsky scandal.

"I don't think the short-term debt is a major issue," Glassman said of the $200 billion a year or so the proposal would add to the deficit.

But Burman said that merely moving investments into the private sector will not magically solve the Social Security system's long-term problem, which he said is not enough workers and too many retirees.

"Going to individual accounts is basically rearranging deck chairs on the Titanic," he said.