Taking on Social Security reform

For those supporting President Bush’s plan to reform Social Security, poll numbers do not paint a promising trend.

In the latest Badger Poll, 49 percent of respondents said Social Security needs a major overhaul, down from 64 percent two months ago. A study by the Pew Research Center, meanwhile, found only 46 percent of respondents favored implementing private accounts, an 8 percent decrease from December.

Despite the souring public attitude toward the plan, state Republicans are confident Congress can pass wide-sweeping reforms to the nation’s 70-year-old retirement safety-net program.

Ryan leading charge in House

Forget the poll statistics — the GOP says a different set of numbers should convince anyone of the urgent need for reform: 2017, the year the program will start taking in less money than it pays out; and 2041, the year the Social Security Trust Fund will go bankrupt.

“Polls are a dime a dozen — it depends on how they’re phrased,” said Robert Trapp, chairman of the First Congressional District GOP of Wisconsin. According to Trapp, reform fares poorer in polls that credit the plan to Bush than in polls without the president’s name.

However, even ardent supporters of reform concede that a privatization plan is unlikely to be passed overnight, with Democrats unified against the idea and some Republicans showing significant trepidation.

“There will be a congressional plan, and then the Senate will have its own version, so I think what we’re looking at is a conference committee at the end of the year,” Trapp said. “Many want a plan this year, but for how long things take in Congress, realistically it will probably go up for vote just before Christmas.”

The ultimate success of potential reform efforts may hinge heavily on a Wisconsinite. U.S. Rep. Paul Ryan, a Republican from Janesville, has been among the congressional leaders championing reform in the new legislative session.

Ryan, one of the youngest members of the House at age 35, proposes letting younger workers invest a portion of their payroll taxes in voluntary, tax-free personal accounts. Full benefits as they exist now would remain for workers older than 55 or any younger worker choosing not to establish an account.

Under Ryan’s plan, as a worker ages, the account’s investments would shift from higher-yielding equity holdings to lower-risk bond assets. Over the course of the worker’s career, the investments would earn a far higher rate of return than Social Security currently does, according to Ryan.

Although Ryan has yet to introduce the legislation in the House this session, many Democrats have come out fiercely opposed to the implementation of private accounts.

The Democrats’ approach is hypocritical, according to Wisconsin FreedomWorks State Director Cameron Sholty, because Ryan’s plan is modeled after the Thrift Savings Plan available to all members of Congress.

“Democrats have drawn their line in the sand, and that’s really unfortunate they won’t move on private accounts,” Sholty said. “All members of Congress already enjoy the benefits of the Thrift Savings Plan, but they won’t let John Q. Public enjoy the same benefits they enjoy.”

But others are concerned the costs of transitioning to private accounts, estimated by some to be near $2 trillion, would prove prohibitive for a federal government facing a record budget deficit.

As payroll taxes are siphoned out of Social Security, the government will have to borrow massive sums of money to make up the shortfall, according to Jeremy Janes, associate director of communications for American Association of Retired Persons Wisconsin.

“If you’re going to start draining money out, you’re going to have to find the money somewhere,” Janes said. “We’ll have to borrow a colossal amount of money.”


AARP, which has been among the most outspoken critics of the private-account proposal, is stressing a more cautious approach to the Social Security problem.

“The premise that the program is in immediate crisis is clearly not true,” Janes said. “The Social Security Trustees confirmed 100 percent of benefits will be paid until 2041. Even after that year, we’ll be able to pay 70 percent of benefits.”

One alternative pushed by those leery of personal accounts would be to lift the cap subject to the payroll tax, where currently only the first $90,000 a person earns is taxed. AARP has proposed increasing the cap to $140,000.

Ryan and others, however, say such a move would merely serve as a stopgap measure that would do little to address the program’s long-term solvency. Even if the cap is completely eliminated, Trapp claims the Trust Fund would start losing money by 2024.

Another alternative, raising the retirement age, has been met with varying degrees of support. Some say it would be appropriate for a society living longer; others claim it is little more than a benefit cut.

“Raising the retirement age may sound all well and good, with people living longer, but the reality is that’s a benefit cut,” Sholty said. “People have been promised they can retire at 67 and get Social Security benefits.”

Even if private accounts prevail, Republican leaders will have to iron out a unified proposal. Bush’s plan differs slightly from the proposal Ryan is currently offering.

Trapp says Social Security would be best served if Republicans — and Democrats — follow Ryan’s lead.

“I really hope that, nationally, Republicans would have Ryan be one of the leading advocates [of reform],” Trapp said.