Social Security proposal under attack

David Kihara and Steve Kanigher

Wednesday, March 30, 2005 | 9:04 a.m.

Democrats in the House stepped up efforts in the valley to counter President Bush's plan to privatize Social Security on Tuesday, with Rep. Shelley Berkley, D-Nev., and Rep. John Spratt, D-S.C., criticizing the president's proposal at a town hall meeting in Las Vegas.

Although the representatives agreed that there are inevitable problems with the current Social Security system that should be addressed, they denounced Bush's threat that the system is in "crisis."

"Not only is privatizing Social Security not the solution to Social Security, it would exacerbate the problem," Berkley said at the West Charleston Library.

Berkley, who acted as the moderator of the town hall meeting, left the main presentation to Spratt, the assistant to the house democratic leader and ranking Democrat on the Budget Committee.

Spratt, who illustrated his argument against Bush's unofficial Social Security proposal with graphs and charts, told the crowd of about 125 people that the country will likely not face a Social Security emergency for several decades, and even in 2041 the government will likely be able to pay out at least 74 percent of the benefits.

Bush's privatization plan would also worsen the already growing budget deficit, Spratt said, adding that because of unexpected events like the Sept. 11, 2001, attacks, the war in Afghanistan and Iraq and the recession, the nation's budget deficit is projected to be $427 billion by the end of 2005.

Bush's Social Security plan would add an additional $4.9 trillion to the country's public debt by 2028, he said.

"The system is too important for us to make rash decisions," Spratt said.

Under Bush's unofficial proposal to privatize Social Security, Americans under 55 could choose to place 4 percent of their Social Security into personal retirement accounts that could be used to invest into certain stocks and bonds that the government deems safe.

President Bush has lauded this proposal, saying that it while it provides Social Security recipients with a smaller portion of guaranteed benefits, it allows Americans greater freedom in investing their money. The plan would also allow people to pass their investments onto others in the event of their deaths.

The proposal has received a halfhearted response from Americans and even Republican lawmakers. This lukewarm reception has pushed the Bush Administration to begin a "60 Stops in 60 Days" tour, in which high-ranking officials in the Cabinet will visit cities across the country publicizing the Bush proposal.

Last week, Vice President Dick Cheney was in Reno to push the president's plan, and on Thursday Deputy Secretary of Labor Steven J. Law will visit the Wildhorse Golf Course in Henderson to advocate for the plan.

Bush's privatization plan, meanwhile, has met with staunch opposition from Democrats, as well as the AARP, the AFL-CIO and other labor organizations.

Spratt's main concern with the Bush proposal is that it will eventually lead to a decrease in the solvency of Social Security because, with 4 percent of an individual's social security earnings going into private accounts, less money would be going into the system.

This, in the end, would hurt future generations of Americans who contribute to the Social Security coffers, he said.

"Someone has to pay the piper," he said.

He also disagreed that Americans would benefit by bequeathing their privatized Social Security funds to their loved ones because when someone dies at 35 or 40 they will have little in their private accounts.

At an earlier meeting Tuesday with the Las Vegas Sun editorial board, Spratt outlined the following problems with the president's plan:

*It would cause the Social Security Benefits -- the money paid to recipients -- to exceed incoming tax revenue as early as 2012, instead of 2017, as under existing law. And the president's plan would also exhaust the Social Security Trust Fund by 2031 instead of in 2041 as now projected, Spratt said.

* Future hikes in Social Security would be tied to increases in prices rather than in wages as under the existing system. Because annual wage increases typically exceed the annual price increases by at least 1.1 percent, Spratt said the practical outcome of the president's proposal is that Americans would see their benefits shrink by 2022, 26 percent by 2042 and 46 percent by 2075.

* People who privately invest payroll taxes would still have to repay Social Security the principal that was diverted from the trust fund plus interest of 3 percent above inflation, thereby reducing the advantages of private investment, he said.

As a solution, Sprayt said one way to reach an accord on Social Security would be to change the age at which a person could receive full benefits.

Republicans, however, are coming out against Berkley for her stance on Social Security. On Tuesday, the Nevada Republican party released a statement saying Berkley is "hiding behind scare tactics."

"Berkley's false attacks against President Bush's efforts to permanently strengthen Social Security run counter to the interests of the one million Nevadans under 30 who are paying money into a system that they will never see back," the statement from the Nevada Republican Party stated.