Reprinted from The Washington Times , 5am -- March 25, 1998
Hill support growing for retirement reform
By Donald Lambro
THE WASHINGTON TIMES
Bipartisan political movement is building in Congress to let Americans invest part of their Social Security taxes into their own personal retirement plans.
With Social Security facing bankruptcy by 2029 and with popular support growing for private retirement plans that would permit workers to put some of their payroll taxes into high-yield stock or bond funds, several prominent senators on the tax-writing Finance Committee have begun work on legislation to do just that.
Leaders of the reform movement, which would be the first structural overhaul of the New Deal program in its 63-year history, said yesterday that the Senate could vote on the issue this year or next year at the latest.
"This is going to be the next big battleground. It would be a massive tax cut that would turn millions of workers into capitalists, who would own the economy and that changes some big political dynamics," said a key Senate Republican official.
A few plans to partially or fully privatize Social Security have been floated in the House, but the idea has really begun to develop a head of steam in the Senate after President Clinton called on Congress in his State of the Union address to develops plans to "save Social Security."
A key breakthrough came earlier this month when Sen. Daniel Patrick Moynihan of New York, the ranking Democrat on the Finance Committee, offered a bill to let workers invest 2 percentage points of the tax rate into investment plans akin to individual retirement accounts.
"This could give an $800 billion tax cut to workers over the next 10 years," Mr. Moynihan said in an interview yesterday. "We're talking real money."
In the last few weeks, several Democrats and Republicans have come forward to embrace parts or all of Mr. Moynihan's plan. And others have offered their own versions. Support for the plan is especially strong on Wall Street, which would benefit enormously from the increased capital investment.
Finance Committee Chairman William V. Roth Jr., Delaware Republican, has proposed using the mounting budget surpluses to let workers begin investing 1.4 percent of taxable income. Sen. Phil Gramm, Texas Republican, is preparing to issue a plan in about a week that would allow workers to use "the power of compound interest" to make the transition from Social Security to a fully funded retirement benefit plan that they would control.
All three senators have discussed their plans with one another and say they could eventually join forces behind a consensus bill. "Pat Moynihan and I have talked about this at some length," Mr. Gramm said.
Mr. Roth intends to introduce his bill later this spring, when his committee will hold hearings on proposals to begin full-scale reform of the system. And the administration will begin a series of town meetings next month to engage the public in a dialogue about what kind of reform has the most support.
Each of the Senate plans is aimed at relieving the present program of the huge costs it faces in the next three decades, when there will be too many retirees and not enough workers to finance their benefits. As the value of the personal-investment plans grow, and are able to produce increased benefits for retirees, Social Security's costs would be reduced accordingly.
"The idea is to put the most powerful economic system to work and that is the power of compound interest," Mr. Gramm said.
"Investing just 1 percent of a 40-year-old worker's income in a retirement account will grow to equal a full 10 percent of his or her Social Security benefit," Mr. Roth said. "For someone younger -- say, 25 [years old] and who has even more time to earn interest -- 1 percent could equal almost 27 percent of their future Social Security benefit."
Copyright 1998 News World Communications, Inc.
Reprinted with permission of
The Washington Times.
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