On the heels of yet another study warning against private accounts, a Senate panel will begin hearing expert ideas this morning on how to improve the long-term solvency of Social Security.
To head off an anticipated shortfall in the 75-year-old pension fund, President Bush wants to divert about 4% of payroll taxes from Social Security into private accounts that would consist of a mix of stock and bond funds. It's likely that management of all those new accounts would be left up to a leading Wall Street money manager, although many industry insiders have argued that it could amount to nothing more than a massive management headache.
Outspoken opponents to the partial privatization plan, such as the AARP, suggest that privatization could be a financial windfall for the financial services industry and on Monday the 35-million member group again renounced the idea as risky. The report on income levels of people aged 50 and higher indicates that people near or currently in retirement increasingly rely on the program, "underscoring the need to strengthen Social Security's guaranteed benefit, and not subject beneficiaries to any increased risk."
AARP President Marie Smith said of retiree income: "There were signs of improvement over the past decade and slight improvements over the past year in many areas, but incomes of Americans 50 and older were below their 1999 levels and reliance on Social Security has increased, not declined, in recent years."
A White House spokesman responded to the AARP by telling the Monterey County Herald that Bush's plan would protect benefits, which would ultimately offer retirees a better standard of living. Private accounts would, in fact, boost benefits, the official said.
Meanwhile, the Senate Finance Committee will hear opinions on private accounts from unidentified experts this morning on Capitol Hill. Reuters is reporting that the discourse will help lay the groundwork to fix Social Security and move Bush's private accounts plan forward against Democratic opposition. The experts will offer insight to lawmakers on measures to ensure the program's solvency, both with and without private accounts.
Opponents to private accounts were expected to rally outside Senate chambers in Washington, while in Texas the president visited Galveston, where city employees do not participate in Social Security. They contribute to private accounts instead.