Finance Hosts Skirmish on Social Security
Though it was billed as the first substantive exploration of plans to shore up Social Security, Tuesday’s Senate Finance Committee hearing only accelerated the rhetorical jousting between Republicans and Democrats over the wisdom of creating private investment accounts under the federal retirement and disability program.
Both Democrats and Republicans seemed to find something to bolster their polar opposite positions on President Bush’s push to allow workers to divert some of their Social Security taxes into private investment accounts in testimony from a panel of academics and economists.
“I think it very much drove home the point that privatization is a bad idea,” said Sen. Max Baucus (D-Mont.), who serves as Finance ranking member and has consistently objected to the president’s plan.
Sen. Jay Rockefeller (D-W.Va.), who also serves on the panel, said he felt at least one panelist — former Clinton administration official Peter Orszag — “decimated” the arguments for private accounts.
“It’s not the same rhetoric. It reinforces the main point which is that the administration has not represented their proposal honestly,” Rockefeller said.
But Sen. Trent Lott (R-Miss.), a Finance member and supporter of the president’s plan, came to the opposite conclusion.
“We’ve been standing on the sidelines screaming at each other up until now. We’ve kicked off here,” Lott said of the hearing. “We’re going to do this.”
Sen. John Sununu (R-N.H.), who has his own plan to create private investment accounts, said the hearing was a “good place to start,” but couldn’t resist taking a swipe at Democrats.
“All of the panelists have proposed substantive ideas for making Social Security solvent, unlike any Democratic Member of the United States Senate,” he said.
The hearing featured five panelists, three of whom have floated plans for private accounts, but also served more as a platform for Members to lay down markers for what they would and would not be willing to consider.
Sen. Rick Santorum (R-Pa.), for example, indicated he would not vote for any Social Security fix that didn’t include the private account option. Meanwhile, Sen. Olympia Snowe (R-Maine), a pivotal swing vote on the panel, reiterated her reluctance to vote for anything that includes the accounts the president has proposed.
Largely because of Snowe’s unwillingness to embrace private accounts under Social Security, as well as the tepid reaction the issue has received from other moderate Republicans, Grassley declared on C-SPAN’s “Washington Journal” program earlier in the day that it may not be politically feasible to pursue the president’s private account plan.
“I hope so, but it may not be,” he said in answer to a question. “Personal accounts are not the main issue as far as I’m concerned.”
Grassley explained that making sure Social Security has enough money to pay benefits in the future is more important than the debate over private investment accounts.
Still, even the normally subdued Grassley got flustered during the hearing by the Democrats’ unwillingness to budge on the issue of creating private accounts under Social Security.
“Those of you who are bad-mouthing every other suggestion out there, suggest your own plans,” Grassley said in a raised voice. “Doing nothing is not an option.”
Meanwhile, both Democrats and Republicans staged elaborate events to try to draw attention to their positions.
House and Senate Democratic leaders marched outside to a rally of union members and other opponents of the president’s plan to hold a campaign-style event complete with piped-in Tom Petty singing, “I Won’t Back Down.”
“Isn’t it nice that we’re so on the right side, and we’re putting the Republicans so much on the defensive?” Baucus asked at the rally in Upper Senate Park.
Republicans held a series of press conferences as well. After one, Sen. Lindsey Graham (R-S.C.) criticized the Democratic rally.
“Their idea is to rally around what they won’t do,” he said. “The Democratic Party is losing their way.”
While the politicians were on message, the panelists weren’t always.
Robert Pozen, chairman of MFS Investment Management and a chief architect of the most popular Republican private account plan, got into a tense back-and-forth with Baucus over the rate of return workers could expect from private accounts. (Bush has indicated he favors Pozen’s plan to use price indexing, instead of the current wage indexing, to determine Social Security benefits for higher-income workers — a plan known as progressive indexing.)
Baucus produced data which he said proved that putting Social Security funds into the stock market would result in an actual loss for most workers given projections on the economy. But Pozen shot back that he used historical data from the past 35 years to determine the amount of money people could expect to receive in their private investment accounts.
“You’re talking about predictions,” said Pozen. “I’m talking about real numbers.”
Under persistent questioning by Baucus, Pozen eventually agreed that private accounts would not earn back all of a worker’s potential loss in guaranteed Social Security benefits.
Under another line of questioning, Pozen acknowledged that one of the biggest selling points for Bush’s plan — that the private accounts would be inheritable by spouses and children — would not always be true. Because most plans would require retirees to buy an annuity with their private investment account earnings, spouses and children could not inherit the annuity.
“To the extent that they annuitize, there won’t be anything to inherit,” Pozen acknowledged.
Rockefeller said exchanges such as those with Pozen and Orszag elevated the debate somewhat.
“It was sharper stuff. You had people contesting each other,” he said.
Indeed, Democrats often asked Orszag to punch holes in the arguments for private accounts and he tried to deliver.
“This is a complete bait and switch,” said Orszag of the president’s plan. “Accounts [will] not do anything to get rid of [Social Security’s projected] $11 trillion debt.”
The hearing fell on the last day of Bush’s “60 Stops and 60 Days” tour of the country to promote his Social Security plan. But facing polls showing that a majority of the public have not embraced his plan for private accounts, Bush said he would continue to travel the country in support of his plan.