By Donald Lambro
THE WASHINGTON
TIMES
Published December 2, 2004
The White House is considering larger Social Security personal investment
accounts than the 2 percent plans often linked to President Bush's
proposals to overhaul the New Deal era retirement system, according to
advisers who have attended administration briefings.
In the weeks since Mr. Bush's re-election,
White House officials have been holding a steady stream of meetings with
Social Security reform advocates from the Cato Institute, the Heritage
Foundation, and leading business and industry associations as they develop
a plan to let younger workers invest part of their payroll taxes in stocks
and bonds that they would own and control.
Participants in these closed-door
policy-making briefings say that Vice President Dick Cheney's office has
become a player in the meetings and that senior officials are considering
plans that would allow investments of up to 4 percent of payroll taxes,
one of the three options proposed by the president's Social Security
reform commission in 2001.
"I don't think they
are limiting themselves to the commission's proposal. I think there is a
strong possibility that the White House is considering larger accounts,"
said Michael Tanner, director of Cato's Social Security privatization
project and one of the advisers who has participated in the White House
briefings.
Both Derrick Max, executive
director of the Alliance for Worker Retirement Security, a broad-based
business coalition that has been lobbying for Mr. Bush's plan and whose
members also have participated in administration briefings, and another
White House adviser, who asked to remain anonymous, predicted the accounts
would be larger than 2 percent but less than 4 percent.
One participant in the White House meetings
said that the emerging plan "will be similar to the federal retirement
system" which allows government employees, including members of Congress,
to invest their pension contributions in mutual stock and bond funds among
other investment vehicles.
"There will be a
limited number of investment choices, somewhere in the range of three
[funds], and all three would be diversified. It will essentially be a very
low cost, stripped-down basic account, a much simpler system than your
average 401(k) accounts," said this adviser.
Of particular interest to many of these
advisers was the role that Mr. Cheney's office has been playing in the
meetings.
"Cheney's office seems to be getting
involved and if it comes down to twisting arms, that's where it's going to
be done," said one participant.
Charles P.
Blahous, who was executive director of the 2001 presidential commission,
and is a special assistant to the president for economic policy, has been
a key figure in the briefings, but participants say the White House is
searching for a major figure to head up and steer the reform effort that
will be presented to Congress early next year.
The White House had hoped that Stanford
University economist John Cogan, a senior fellow at the Hoover Institution
who served on the Social Security reform commission, would take that job,
but he has turned down the offer, citing family responsibilities.
Administration officials say that Mr. Cogan remains a key member of their
"brain trust" who will play a significant role in shaping the final
product before it is submitted to Congress.
Mr. Cogan, among others advising the White
House, is urging Mr. Bush to move swiftly on his reform plan while he
still has plenty of political momentum from his re-election and his
party's gains in Congress.
"The odds of
getting Social Security reform have never been better because you have a
president who is firmly committed to getting it, who has just won a
significant re-election and who has a majority of both houses of Congress.
Every expert who has looked at the issue knows that now is the time for
reform," Mr. Cogan said in an interview.
However, he said, "you don't necessarily have
to start out big. It can be done on a gradual basis, with a long lead
time, but you want to get started right away so individuals can benefit
from the power of compound interest."
"Once
people find out how much they can earn [in their personal investment
accounts], they will demand that they be allowed to put more money into
it," Mr. Cogan said.
The biggest issue the
administration still has to solve is how to offset the loss of taxes to
the private investment accounts. Think tanks and business leaders who are
advising the White House say they remain opposed to raising the payroll
tax cap, preferring to finance the costs from other general fund savings
and tax reform.
Sen. Lindsey Graham, South
Carolina Republican, has proposed a 4 percent plan that could raise the
cap on taxable payroll from $87,000 to $150,000 to help offset the costs.
He said yesterday that if the White House plan has any chance of passage,
Mr. Bush is going to have to accept "nontraditional Republican concepts to
solve this problem."
Currently, employees and
employers split the Social Security payroll tax of 12.4 percent of wages.
Mr. Graham also said that Mr. Bush's proposal
cannot pass without Democratic support and that he has talked to "a
handful of [Senate] Democrats who are seriously considering solutions to
Social Security" who are open to a compromise solution on transition
costs.
"We've got a six-month window here to
do this because after that everyone will be focusing on the 2006
[congressional] elections. We need to be bold and we need to be quick," he
said.
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