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Social Security Looming Large in Pennsylvania Senate Race
January 16th 05:17:35 PM
From the Citizen's Voice
State Treasurer Robert P. Casey Jr., the leading challenger for Santorum's Senate seat, says that's not a plan, it's a "scheme." Santorum responds that Casey hasn't advanced any reforms.
The Republican push for Social Security reform appears bogged down, but the debate between the leading contenders for Pennsylvania's U.S. Senate seat appears to be just getting started.
The argument is over how to save Social Security, which is funded by payroll taxes that pay benefits to retirees.
That system is expected to face a major crisis about a decade from now. That's because the nation's large baby boomer generation will start retiring in 2010, creating a much expanded pool of beneficiaries at the same time the number of people paying taxes to fund the system is declining.
The trick is to make sure the system has enough money to pay future benefits without cutting them.
President Bush reinvigorated the debate last year when he set out to use the political capital he claimed after his re-election to fix the nation's largest retirement plan.
Santorum, one of Bush's biggest Republican backers, stumped statewide for reform last February.
In a state with the second largest percentage of elderly residents, it was politically risky to propose changes.
But Santorum warned, to do nothing was to invite disaster and benefit cuts.
He pushed a plan for optional personal retirement accounts, allowing people to divert a third of their Social Security payroll taxes into the stock market or other higher-yielding investments.
When the senator touted reform Feb. 24 at the University of Scranton, Casey wasn't even in the race. Eight days later, he jumped in the race, saying the "misguided" push to "privatize Social Security" was a key reason he is running.
Risky business?
Polls show an electorate highly skeptical about retirement accounts. Congressmen fear losing elections this year if there's change in the system. Even Republicans disagree whether allowing private investment is a good idea.
So the push for reform stalled, but politics is reigniting the debate in the Pennsylvania Senate race. It is a debate defined lately by what the two candidates aren't saying.
In Santorum's eyes, Casey hasn't offered any alternative to save a system that is expected to start paying out more than it collects by 2017 and exhaust its reserves as early as 2041.
Casey says Santorum isn't talking much about personal retirement accounts lately because he doesn't want to offend voters.
Santorum says he heard the fears about the accounts so he proposed a law guaranteeing current Social Security benefits to anyone 55 and older to assuage fears that reform will hurt them. He's proposing another law to promise part of the current Social Security surplus, now used to balance the federal budget, to people who sign up for personal retirement accounts instead of promising to repay it to the Social Security Trust Fund.
Despite hearing opposition during his tour, Santorum said he's still in favor of personal retirement accounts, which could allow people to earn a better return than the current system. The theory is that higher returns from investments will eventually increase the trust fund's solvency by reducing the amount in payroll taxes needed to pay benefits.
Few specifics
Neither Casey nor Santorum have proposed detailed plans of their own, but then few congressmen have. Even the president hasn't.
The senator's point is he's said far more about protecting Social Security than Casey.
"You can be critical of what I do. That's part of the game. That's what you have campaigns about," Santorum said. "But you can not be critical of how I would get to solvency and how I would get to providing good benefits for future retirees without offering an alternative. And he offers absolutely no alternative."
To Casey, Santorum and the president propose a "scheme" that will lead to dismantling Social Security.
Critics of personal retirement accounts say they will require massive borrowing to pay current retirees' benefits, because some payroll taxes will have to go to the new accounts.
And that, they say, will only worsen annual federal budget deficits. Critics argue that payroll taxes will be wasted on investment management fees and personal accounts risk stock market losses.
Even some moderate Republicans, he notes, now question retirement accounts. Casey said Santorum's recent television ad about Social Security never mentioned personal accounts because they're unpopular.
Casey said, "If he were being honest about his position on Social Security, he would reiterate what he was talking about in the spring (the accounts), which he hasn't been able to get out of his mouth lately because he knows that the country doesn't want this program privatized."
Casey does not offer a specific solution. He says the Republican-led Congress can start by concentrating on the deficit and "get the economy back on track."
In the 1990s, deficit reduction allowed the government to pay down the federal debt, now more than $8.1 trillion and growing again, and put the country in a position to strengthen Social Security.
"I don't think the American people are going to think that the leaders of the Congress like Sen. Santorum are serious about Social Security until you take privatization off the table and do something credible with regard to the deficit and growing the economy," Casey said.
Pay now or pay later?
Pamela Causey, spokeswoman for the National Committee to Preserve Social Security and Medicare, which opposes the accounts, said no negotiations on a bipartisan solution should happen unless Republicans exclude accounts from the discussion.
"(Otherwise) they will try and find a way to stick them in," said Causey. Her group has a political action committee that contributes mostly to Democratic candidates.
Santorum said he's willing to consider a range of options for ensuring Social Security's solvency, including higher payroll taxes, benefit cuts, a higher cap on income that is subject to the tax and personal retirement accounts. In that context, ruling out personal retirement accounts at the outset isn't fair, he said.
"I mean that's not a negotiation," he said. "It's typical Washington-think, which is, 'You do it my way, I'll be happy to negotiate.' How does that get you anywhere?"
Casey hasn't put forward any solution, he said, because "his alternative means you're going to either cut benefits or increase (payroll) taxes and most likely have to do both, and he doesn't want to talk about that because if he did no one would vote for his plan."
David John, a specialist in Social Security for the conservative Heritage Foundation, said there's no doubt large-scale borrowing will be needed to switch to a system with personal retirement accounts. But the Social Security Administration estimates that will be 30 to 40 percent cheaper over the long haul than other alternatives, he said.
"The question really comes down to 'You can pay me now or you can pay me later,'" John said. Critics say that isn't necessarily true, especially if the government has to make up for investment losses.
John said it's perilous for politicians to ignore the problem, pointing to a December Gallup poll that showed three-quarters of Americans think it is very or extremely important to solve the problem in the next year.
"That suggests that politicians, even if people don't like their response, will get credit for bringing up the issue. It also suggests a political danger to candidates who say nothing needs to be done or do nothing," he said.
Posted by Chris Schrimpf
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