Snow pushes Bush plan for personal accounts
In visit to the bay area, the Treasury secretary suggests tying Social Security payments to prices rather than wages.
By HELEN HUNTLEY and JEFF HARRINGTON
Published February 25, 2005
U.S. Treasury Secretary John Snow brought President Bush's campaign for Social Security overhaul to the Tampa Bay area Thursday, pledging not to cut benefits for older Americans, but offering some insight into how they might be trimmed for those who are younger.
Snow spent an hour addressing about 30 members of the Greater Tampa Chamber of Commerce's board, a decidedly pro-Republican, pro-Bush setting. He also met with Times writers and editors.
"One of the things I hope to do while I'm in Florida is make it crystal clear that those 55 and older will not be affected," he said.
Key to Bush's proposal is letting younger workers put part of their Social Security taxes in private accounts that could invest in stock and bond funds.
"Even though benefits will come down, they'll have a chance to offset some of the reduction," Snow said.
Bush has suggested several ways benefits might be trimmed, from raising the retirement age to setting income limits on eligibility, but hasn't endorsed an option.
Snow talked about one of the ideas that he finds particularly appealing - changing the way benefits are calculated.
Social Security benefits are based on a worker's 35 best years of earnings. Those earnings are adjusted for the increase in average wages over that period. An alternative would be to adjust wages for price increases. Because wages grow about a percentage point faster than prices each year, a switch to price indexing has the potential to solve the Social Security shortfall.
"Since wages grow faster than prices, every generation is being promised the opportunity to retire better than every prior generation, which would be a wonderful thing if we could afford it," Snow said. With price indexing "people will continue to retire at levels at least as good as prior generations."
Opponents say the benefit cuts would be so substantial that retirees dependent on Social Security would end up with a much lower standard of living than their working neighbors.
Snow says the new system could be phased in gradually by applying price indexing only to future earnings. For example, someone who had worked for 20 years would have the old formula used for those earnings and the new formula for future earnings.
Tampa chamber members peppered Snow with questions about how the private accounts would work. Several speakers offered the Treasury secretary suggestions on how Bush could do a better job of selling a makeover to the American public.
Former Florida Gov. Bob Martinez suggested Congress pass legislation to "rememorialize" the benefits promised to seniors, basically assuring them their Social Security benefits will not be affected by long-term changes.
The visit marked Snow's third appearance at the Tampa chamber in two years. He is scheduled to meet today with the Jacksonville chamber. The chambers were chosen during the first stage of the Bush Cabinet road show on Social Security in part to get the administration's message out consistently and clearly. Robert Nichols, a spokesman for the Department of Treasury, said business leaders with the chamber, in turn, can pass the message on. "They act as miniecho chambers," he said.
Barring any changes, Social Security won't have enough money to pay full benefits in 2042, according to projections by Social Security trustees. Every year that the country delays changes to help bolster Social Security, it becomes harder to fix, Snow said.
"It's all about arithmetic and demographics," he said.
Getting traction for a makeover has proved difficult however. In states with a large elderly population, such as Florida, the AARP and Democrats have warned seniors that future benefits may be jeopardized. They have accused Bush of trying to manufacture a Social Security crisis as a means for promoting privatization, which would help Wall Street.
Snow said he merely wants to get a dialogue going about how best to reform the system. Despite repeated assurances that all options are on the table, Snow did emphasize, "The personal accounts are an essential part of any solution."
He said the accounts are the best way to provide for younger workers: "The whole issue is in one sense the future of our younger people."
However, Snow acknowledged that Medicare and Medicaid loom as far more difficult problems than Social Security.
"Rising health care costs are a huge threat to the long-term fiscal posture and economics of the country," he said. "Unless we get a break on Medicare and Medicaid, they're going to be the whole budget of the United States at some point."
[Last modified February 25, 2005, 00:51:16]
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