Bush plan lets workers invest some payroll tax

2% of Social Security could be diverted to stock, bond funds

May 16, 2000|By Paul West and Jonathan Weisman | Paul West and Jonathan Weisman,SUN NATIONAL STAFF

WASHINGTON - Criticizing the Clinton-Gore administration's failure to tackle Social Security reform, Texas Gov. George W. Bush proposed yesterday to let younger workers voluntarily invest some of their payroll tax money in the stock market.

The Republican candidate's plan all but assures that Social Security will be a focal point of the fall presidential campaign for the first time in decades.

Venturing onto political terrain that has often proved disastrous for Republican politicians, Bush was vague about his proposal. Vice President Al Gore ripped apart former Sen. Bill Bradley's detailed health care initiative - and Bradley with it - during the Democratic primaries. Bush clearly wishes to avoid a similar fate in the general election.

At the same time, Bush aides calculate that he can gain credit, particularly among voters younger than 50, by addressing one of the most politically difficult problems facing the country.

Social Security is projected to start running a deficit within 25 years if no changes are made in the program, and younger Americans are especially pessimistic about their chances of receiving benefits. "When I am elected, this generation and this president will save Social Security," declared Bush, 53.

He called for the most sweeping change in the 65-year history of the New Deal program: a system of personal retirement accounts that would allow workers to direct a portion of their Social Security tax into stock and bond investment funds.

Such a plan, Bush said, would allow workers to build personal wealth at a faster rate than Social Security. His campaign gave the example of a 22-year-old earning $30,000, who could divert 2 percentage points of his payroll tax into a stock-and-bond account that could grow into more than $150,000 at retirement.

Bush attacked the administration for failing to provide leadership on the issue and accused Gore of proposing a "Band-Aid approach" to the problem. "He says, `If it ain't broke, don't fix it.' But in the lifetime of some people in this room, it will be broke, and we must fix it," Bush said. "With every day of delay, this becomes more difficult."

Gore would devote virtually all the projected Social Security surplus - more than $2 trillion over the next decade - to paying down the federal debt, with the resulting interest savings going toward extending Social Security's solvency. That, he maintains, will keep the system afloat through 2050.

Bush, who has been waging a long-distance debate with Gore over the issue for weeks, said he was putting the vice president "on notice" that the time for "spreading fear and panic ... and demagoging" Social Security "for political advantage" is over.

Democrats have been so successful over the years in portraying Republicans as enemies of the program that it long ago became known as the "third rail" of American politics for would-be reformers: Touch it and you die.

Gore lost no time in trying to poke holes in his rival's plan.

Noting that "many questions" remain unanswered, Gore charged that Bush's proposal would weaken the economy, undermine the government's long-standing commitment to retired workers and make it more difficult to pay down the federal debt. "The numbers just don't add up," Gore said, putting a cost of nearly $1 trillion on the proposal, which Bush would pay for out of surpluses in the Social Security program over the next few years.

Speaking at Beaver College in suburban Philadelphia, the vice president urged voters not to be seduced by the dizzying stock market rise of recent years. Social Security, Gore said, is not "a way to make money in the stock market" but "a solemn compact between generations" and "a basic guarantee of retirement security."

He warned that while some would do well in a semi-privatized system, others would fare poorly.

Strategists in both major parties said Bush's initiative has the potential to alter the outcome of the fall election, especially because battleground states such as Pennsylvania and Ohio include disproportionately large numbers of older voters.

The key group that politicians will be watching in coming months: voters ages 55 and older. They are the most likely to turn out on Election Day and have historically been the most receptive to Democratic scare tactics over Social Security and Medicare.

Bush's internal polls show that the idea of letting workers divert some Social Security money into the stock market is "wildly popular" among younger voters, said a Republican campaign aide.

Paul Maslin, a Democratic pollster in California, said that from a political standpoint, Bush's plan "is a risk." "But I don't think it's a crazy risk," he added.

He said Bush could well end up helping himself with voters younger than 50.

In unveiling his plan, Bush chose a senior center in Rancho Cucamonga, Calif. Even though his reforms are targeted at younger voters, he spoke about America's need to meet its commitment to the elderly and promised to lead a bipartisan effort to reform Medicare as well.

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