THERE'S NO secret to the popularity surrounding proposals that would allow Social Security funds to be invested in the stock market. Potentially high market returns offer the only pain-free solution to the pending insolvency of the nation's retirement program.
Unless changes are made, come 2032 Social Security will be unable to continue paying full benefits to retirees, the disabled and the surviving spouses and children of deceased workers.
President Clinton and Congress both agree that settling on a plan that ensures the solvency of Social Security through the retirement of the Baby Boom generation is a top priority for early 1999. And there's no time to waste. Once the 2000 presidential campaign heats up the already slim chances of extracting a bipartisan agreement lessen considerably.
Mr. Clinton has hinted that he may advance specific reform proposals during tonight's State of the Union address. The rumblings come just weeks after he signaled that he favors a plan to partially privatize Social Security by freeing up part of each government retirement tax contribution for investment on Wall Street.
Currently Social Security contributions are invested in Treasury securities held in a government account, which average a return of 2.7 percent after inflation. So it is no wonder that Mr. Clinton is interested in tapping into historically higher stock market gains. And better market returns could lessen the need for enacting other unpopular ways of rescuing Social Security that include increasing payroll taxes, raising the age for receipt of retirement benefits and reducing benefits.
But there are serious questions that nag at most plans to privatize -- or partially privatize -- the government retirement program that is the main income source for most its 44 million beneficiaries.
What happens, for instance, to people who retire during a bear market? And how do you ensure adequate benefits for the 33 percent of Social Security recipients who have not been able to turn their Social Security contributions into an adequate account? This group includes the disabled and the surviving spouses and children of deceased workers.
There may be workable solutions to these thorny issues -- particularly if Mr. Clinton stands by his promise to use a large portion of the federal surplus to rescue Social Security.
But far easier issues have fallen victim to partisan sniping. As the White House and Congress attempt to tackle this controversial task, clear guiding principles are key. The most important one is preserving the safety-net quality of Social Security that has slashed the poverty rates of the nation's elderly from 35 percent in 1959 to 11 percent today.
Working within that framework, employees who have spent their careers paying into Social Security can rest assured that regardless how the system is reformed, it won't be ruined.
Pub Date: 1/19/99