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Thursday, November 2, 2000
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Independent Analysts Refute Al Gore's Social Security Charge
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-Bixby & Reischauer-
Austin - Independent analysts, as quoted in the New York Times today, refuted Al Gore’s charge that under Governor Bush’s plan to strengthen Social Security, he would have to pay $1 trillion to two groups of people, current retirees and younger workers.
Robert L. Bixby, executive director of the Concord Coalition, a fiscal watchdog group, said in today’s New York Times, “Mr. Gore's assertion ‘is a technical definition to the point of being a distortion.’ Bixby also says, regarding Gore’s tactics, ‘I don't think it's at all fair to scare people over current benefits.’
Robert D. Reischauer, a former director of the Congressional Budget Office and current president of the Urban Institute, a research group, says in the article that Bush’s plan takes advantage of America’s current surplus to strengthen the system because “the system right now has a trillion of reserves,’ says Reischauer.
According to Reischauer: ‘Even under the Bush proposal those reserves will double in the next decade. The point at which we would begin drawing down reserves would occur earlier and the reserves would run out sooner, but this is not an immediate problem.’
The following is the transcript of the complete article:
“The 2000 Campaign: Social Security; Gore and Bush Clashing Over Retirement Proposals,” New York Times, by Richard W. Stevenson, 11/02/00
“As the presidential race draws to a close, Vice President Al Gore is asserting that Gov. George W. Bush's plan to create personal investment accounts within Social Security would eat up $1 trillion needed to pay benefits to current retirees.
“The Bush campaign says Mr. Gore's implication that benefits to current retirees are at risk is flat wrong and a deliberate attempt to scare voters. And some independent analysts say no one's benefits would be endangered for more than two decades, if then, just by diverting $1 trillion into private accounts.
“The Gore campaign does not concede the point. In any case, aides to Mr. Gore said, the real issue is that personal account plans of the type Mr. Bush is advocating, when fully fleshed out in a way Mr. Bush has declined to do, invariably require benefit cuts to current and future retirees, or large infusions of general tax revenues into Social Security -- the very approach that Republicans have assailed Mr. Gore for adopting.
“In sorting out the competing claims, it is helpful to start with the outlook for Social Security if nothing is done to strengthen its long-term financial condition. Under current projections, the retirement system will take in more through payroll taxes than it will pay out in benefits for the next 15 years.
“Starting around 2015, Social Security will start relying in part on interest payments on its holdings of government bonds -- the Social Security trust fund -- to pay benefits. By 2025, as the number of retirees swells, the system will have to begin redeeming the bonds to pay benefits, and by 2037, the trust fund will be exhausted, leaving Social Security completely dependent on payroll tax revenue.
“At that point, the system would be able to cover only about 72 percent of promised benefits.
“Both sides agree that Mr. Bush's plan would accelerate that timetable because it would reduce payroll tax revenue going into the system. Mr. Bush would allow workers to place 2 percentage points of their 12.4 percent payroll tax into investment accounts.
“Over the first 10 years, the change would use up roughly $1 trillion of the Social Security surplus, a figure used by both campaigns. Including interest payments on its bond holdings, the retirement system's surplus is projected at nearly $2.4 trillion over that period. Both the interest and principle on the bond holdings would have to be paid out of general tax revenues.
“By the Gore campaign's calculation, Mr. Bush's plan would leave the trust fund exhausted in 2023, 14 years earlier than under current law. Ari Fleischer, a spokesman for Mr. Bush, said the Bush campaign has calculated the exhaustion date to be between 2025 and 2030.
“In either case, the projections show that there is sufficient money, from payroll tax revenue plus the bond holdings, to pay full benefits for at least the next 23 years if nothing is done other than to create the personal accounts.
“‘By no stretch of the imagination can it be said the $1 trillion has been promised to two groups of Americans,’ Mr. Fleischer said.
“Taken literally, Mr. Gore's argument hinges on the possibility that some current retirees might still be drawing benefits 23 years from now, and that their benefits might be at risk starting then if no other changes are made to the system.
“Mr. Gore's assertion ‘is a technical definition to the point of being a distortion,’ said Robert L. Bixby, executive director of the Concord Coalition, a fiscal watchdog group. ‘I don't think it's at all fair to scare people over current benefits.’
“Robert D. Reischauer, a former director of the Congressional Budget Office, said Mr. Gore's point is fair if the time frame is decades.
“‘But the system right now has a trillion of reserves,’ said Mr. Reischauer, who is now president of the Urban Institute, a research group. ‘Even under the Bush proposal those reserves will double in the next decade. The point at which we would begin drawing down reserves would occur earlier and the reserves would run out sooner, but this is not an immediate problem.’
“Mr. Gore's case is stronger if he is assumed to be making a broader point that creating personal accounts does not by itself solve Social Security's problems, and that putting Social Security on solid footing will require some painful tradeoffs.
“Ron Klain, a spokesman for Mr. Gore, said Mr. Bush often justifies the prudence of his approach by pointing to personal accounts proposals introduced in Congress in recent years.
“To meet Social Security's standard of 75 years of solvency, a number of those proposals include benefit cuts, in the form of reduced cost of living adjustments or increases in the retirement age. Others require that the government provide extra money to the system out of general tax revenues. Still others would limit the gains that individuals could reap from their investment accounts.
“Nearly all personal account proposals also involve reducing the guaranteed benefit going to retirees, under the assumption that any cut would be at least offset by gains from the investment account.
“Mr. Bush has avoided endorsing or ruling out benefit cuts or any other steps that would have to accompany the creation of personal accounts, saying the details would have to be worked out in a bipartisan way.
“Mr. Gore's advisers said Mr. Bush is throwing up a smoke screen to obscure the certainty that benefits would have to be cut. Even if there is technically enough money to pay full benefits until 2023, they said, any benefit cuts would have to be spread out to hit people who retire well before that date as well, simply as a matter of fairness.
“‘If we take the totality of Governor Bush's plan, which includes his promise to take out $1 trillion, his criticism of general revenue transfers and his promise not to raise payroll taxes,’ Mr. Klain said, ‘there is no way you cannot cut benefits to current retirees.’”
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