Politics

Social Security Scrap

By CBSNews.com staff CBSNews.com staff

July 19, 2001 / 9:58 PM EDT / CBS

The battle over Social Security reform became a full-fledged political war Tuesday, as a White House commission defended its report citing urgent need for changes in the retirement program, while Democratic opponents accused the commission of using scare tactics.

The commission, which President Bush named in May, warned earlier this week of a financial crisis facing Social Security that could trigger reduced benefits or higher taxes — setting the stage for the president's plan to allow people to invest part of their benefits in the stock market.

But in what amounted to a declaration of war, Democrats said so much interest is piling up in the Social Security Trust Fund it may be 2038 before the system will be handing out more than it takes in, reports CBS News Chief Washington Correspondent Bob Schieffer.

What will make the situation worse, Democrats claim, is adopting the president's plan to let workers invest part of their savings in the volatile stock market.

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"Social Security will not be secure if it's invested in the stock market," said Sen. Maria Cantwell, D-Wash.

Cantwell should know; she made millions in the market, then lost most of it when technology stocks went south.

Democrats accused the commission of using scare tactics to build support for the president's proposal, reports CBS News White House Correspondent Peter Maer.

"The attempt is to frighten the American public into believing that the system is in such bad shape that we need a radical solution," said Rep. Robert Matsui, D-Calif., ranking Democrat on the House Ways and Means Social Security Subcommittee.

Opponents have mounted a campaign to discredit the panel, and demonstrated outside the Washington hotel where it was meeting. Rallies and other events also were held across the country.

"The president's commission has published a misleading, misguided report that is one of the most skewed documents I have seen in many, many years," said House Minority Leader Dick Gephardt, D-Mo.

A co-chairman of the commission Tuesday backed off some of the harshest lanuage in the report.

Richard Parsons, AOL Time Warner chief operating officer, said he went too far when he stated in the commission's preliminary report that the system was "broken."

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"The real issue is the system won't work in perpetuity" and is "financially unsustainable" in the future, he said.

He and his co-chairman, former Sen. Daniel Patrick Moynihan, D-N.Y., also said that benefit cuts aren't likely before the system goes broke in 37 years. That's a promise that is "about as sure as anything is in this life, which is not 100 percent," Moynihan said.

Commissioners, frustrated with the criticism, said opponents should stop the bashing and help find solutions.

"I would urge my fellow Democrats to lower the rhetoric, stop the 'kill the messenger' strategy and focus on trying to address a very serious problem simply by calling out names," said Robert Johnson, chief executive officer of Black Entertainment Television, which is owned by CBS parent company Viacom.

As baby boomers start retiring, they will strain Social Security because fewer workers will be paying into the system. The report, approved Tuesday, says Social Security cannot meet its promise to future retirees without reducing benefits, increasing taxes or massive government borrowing, and that an overhaul of the system is needed. It also suggests that women and minorities would benefit more from private accounts than the current system.

Establishing when Social Security will be in trouble is one of the biggest debates.

The commission says 2016 is when the system will pay out more in benefits than it takes in from payroll taxes, draining the Social Security surplus. Commissioners also argue that because the trust fund contains treasury bonds and not real money, the government will have to find the money to redeem the bonds to pay benefits, which could mean tax increases or spending cuts.

But opponents say the trust fund was established for that reason to fund the future strain, and there's no reason for panic until 2038. That's when Social Security is projected to go broke. Also, creating private investment accounts could mean that the trust fund would start being dissolved sooner than 2016, opponents argued.