Several congressional Republicans began the roll-out yesterday for a new way to privatize Social Security. A lot of leading GOP figures sounded pretty excited about it. An aide to House Speaker Dennis Hastert (R-Ill.) called the bill “a great start,” and House Majority Whip Roy Blunt (R-Mo.) called it “an excellent first step.” Rep. Eric Cantor (R-Va.), the deputy House majority whip, called it “a breakthrough day,” and Sen. John Sununu (R-N.H.) said the announcement was a victory simply because “there is movement” on the issue.
One wonders if they even understand the plan they’re praising.
After watching the Social Security debate from the sidelines, House Republican leaders yesterday embraced a new approach to Social Security restructuring that would add individual investment accounts to the program, but on a much smaller scale than the Bush administration favors.
The new accounts would be financed by the Social Security surplus — the amount of payroll tax revenue not needed to pay current benefits. That money is now used to fund other government activities and is expected to run out after 2016 as the baby-boom generation retires. … Republicans hope the new proposal will shift the debate away from future benefit cuts, as Bush envisions, to ending what they call the “raid” on the current Social Security surplus.
I happened to catch the press conference held by Republicans from the House Ways and Means Committee, when they were unveiling this new approach. There weren’t many reporters there, so there weren’t many questions. With this in mind, instead of simply trashing the Republicans’ new scheme, I thought I’d ask some questions that highlight some of the, shall we say, “difficulties” with the idea.
* GOP talking points for several months have insisted that the Social Security trust fund doesn’t exist. The new GOP talking points say the fund not only exists, but can finance an entire system of private accounts. When and why did the old talking points become inoperative?
* On several occasions yesterday, Republican lawmakers said these surplus-financed private accounts don’t solve the system’s solvency problem, but are an important “first step.” Since using the surplus for private accounts would necessarily make Social Security’s solvency problem much worse much sooner, how, exactly, does the GOP define “first step”?
* Republicans from the Ways and Means Committee said yesterday that it’s outrageous that money from the Social Security surplus goes towards general revenue. Can the right explain, then, why this has been a staple of Republican budgetary policies for over 25 years, including the present?
* Right now, Social Security surpluses currently help fund annual government spending. If we redirect that money into private accounts, we’ll need to either raise other taxes dramatically, or make deep cuts in domestic and defense programs. Which of these are Republicans now prepared to recommend?
* On a related note, using the system’s surplus — which, again, Republicans said yesterday is completely unacceptable — helps masks the actual size of the deficit. Are Republicans now prepared to argue that the federal budget deficit is actually approaching $600 billion?
* Under this new plan, Social Security surpluses would be earmarked to new government bonds devoted to private accounts. But if these government bonds are still under government control, how “private” are they?
* To administer the new private accounts, the government would need at least $25 billion over the first 10 years and thousands of new federal employees. Where do Republicans plan to get this money?
* Social Security trustees expect the system’s annual surpluses to end, at the earliest, in about 12 years. After this happens, how would these private accounts be financed?
* The president has said nearly every day for seven months that Social Security’s long-term challenges have to be addressed immediately because the system is “in crisis.” This plan does literally nothing to address this “crisis” and actually makes it worse. How, then, will it generate White House support? Or, for that matter, Democratic support?
* Republicans who support this approach say it’s important to address Social Security’s long-term outlook, but an independent analysis from the Social Security Administration’s chief actuary shows that these surplus-financed private accounts would actually result in a bigger shortfall than if Congress took no action at all. Why, then, would this be a good idea?