GAO Releases Social Security Primer

The Government Accounting Office (GAO) has released a very good primer on the challenges facing the Social Security program and the difficult choices Congress and the country must make to address those challenges.

The guide, called Social Security Reform: Answers to Key Questions (GAO-05-193SP, May 2005) provides answers to questions about the
most basic aspects of the Social Security and reform issues in a concise and easy-to-understand format. It provides straightforward answers to how
Social Security works, why it needs reform, what the basic options are, and
how to assess their implications. It also includes a glossary of terms and
bibliography of related GAO products.

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House Focuses On Social Security

Bill Thomas (R-CA) and the Ways and Means Committee kicked off the first of many committee hearings on Social Security today. The Committee will hear from a number of witnesses, including senior fellow Jason Furman of the Center on Budget and Policy Priorities; Eugene Steuerle, a senior fellow at the Urban Institute; Michael Tanner, director of the Cato Institute's Project on Social Security Choice; Robert Pozen, and former economic advisor to President Bush, Lawrence Lindsey. The Ways and Means Subcommittee on Social Security, which is chaired by Rep. Jim McCrery (R-LA), will hold the next hearing on May 17th.
House Reps remain split on how to proceed with Social Security legislation. Chairman of the House Rules Committee, Rep. Mike Pence (R-IN), said yesterday, "Let's get on with it. Let the House lead on Social Security reform. If the House goes first, we will produce a reform that is consistent with the President's vision for a 21st Century public retirement system." A number of other House members remain skeptical however, raising concerns that it may be risky to pass legislation without knowing it would have Senate support.
Thomas met last night with Sen. Ben Nelson (D-NE) one-on-one to discuss his ideas for shoring up Social Security. Nelson noted Thomas is promoting "fundamental changes that [are] broader than Social Security." Thomas discussed some specifics regarding his ideas in an April 29 press conference. A recent CBPP report discusses the details mentioned by Thomas, and highlights the fact that Thomas may be looking to use Social Security legislation as a means to push for more tax breaks for the wealthy. The report can be read here.

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GAO Report on SS Reform Options

On May 6 the Government Accountability Office sent a letter to Ways and Means Chair Bill Thomas (R-CA) on Social Security reform options. The report provides a list of various reform options, each of which has been scored by the Social Security Administration's Office of the Chief Actuary. The list reflects all provisions that have appeared in SSA proposals in the last few years, and it includes policies that rely on modifying benefits, raising taxes, or overhauling the program to include either payroll tax-funded individual investment accounts or "add-on" accounts financed outside of payroll taxes.
The Ways and Means Committee will be further exploring Social Security reform in hearings in the near future. Although others in his party are wary, Thomas wants to push ahead with work on legislation in June.

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House GOP Split on SS; Analysts Respond to Proposals

House Republicans, it seems, are split on how to act on Social Security. Some, including Speaker Dennis Hastert (R-IL), want to wait for the Senate to act before moving forward with legislation proposals. Others, such as Tom DeLay (R-TX) and Bill Thomas (R-CA) have indicated that they want to move forward with hearings and legislation more quickly. Click here for more information.
There has been a lot of reaction to the news conference President Bush gave last week. This New York Times editorial discusses how Bush's plan may sound like he is trying to guard poor people from cuts, but that in reality his plan would significantly reduce benefits for millions and millons of Americans. The Center for American Progress and CBPP have also analyzed both the President's plan and Robert Pozen's Progressive Price Indexing Plan. The analyses are below.

  • Why the President's Social Security Proposals Could Ultimately Lead to the Unraveling of Social Security
  • Analysis of Conservative Social Security Proposals Presented Before the Senate Finance Committee
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    Bush Talks to the Public About Social Security

    In President Bush's news conference last night on energy and Social Security reform, he stated, "I know some Americans have reservations about investing in the stock market, so I propose that one investment option consist entirely of treasury bonds, which are backed by the full faith and credit of the United States government." (the entire transcript can be read here.
    This statement is interesting given the fact that on his "60 day, 60 city tour" Bush spent much of his time discussing how the treasury bonds in the trust fund are little more than IOUs which the American people expect will be paid back by the government someday.
    He has been discrediting the trust fund as nothing more than IOUs, just last week he said, "You see, a lot of people in America think there's a trust, in this sense -- that we take your money through payroll taxes and then we hold it for you, and then when you retire, we give it back to you. But that's not the way it works. There is no "trust fund," just IOUs that I saw firsthand, that future generations will pay -- will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs." He has been criss-crossing the country saying this, yet last night said the trust fund has the full faith and credit of the United States Government.
    Bush spent much of his press conference discussing the need for responsible reforms to Social Security; reforms that he says won't cut benefits for people and that will keep retirees receiving benefits out of poverty. Yet in the same breath he says he believes the best way to do this is to have workers divert a percentage of their payroll taxes into a personal account. Hundreds of economists, policy analysts, and Social Security experts have come out over the last few months and said that personal accounts will add a level of risk to the benefits being paid to recipients. Bush is still trying to market a bad plan to the American people, yet disguising it as one that is both necessary and progressive. Private accounts are neither necessary nor progressive, and luckily, polls have shown that more and more Americans are believing this to be true.

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    Bush News Conference On Energy and Social Security

    Tonight at 8:30 PM (EST) the President will hold his first publicly broadcasted evening news conference since the start of his second term. At the news conference he will discuss plans for overhauling Social Security, and he will also discuss the high gas prices which have been plaguing the nation in recent months.
    Press Secretary Scott McLellan has noted that Bush will speak more specifically about his plans for Social Security reform than he has been. The President has been criticized by many for not speaking specifically enough regarding his exact plans for reform. During the conference Bush is also expected to urge Congress to pass his energy reform plan. High oil and gas prices are beginning to take a toll on the the level of national economic growth, as well as on Bush's approval ratings. Click here to read Sierra Club comments on his energy plan.

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    Finance Committee Hearing on SS Solvency

    The Senate Finance Committe held a hearing yesterday on the issue of Social Security solvency and private accounts. Witnesses testifying before the committee included Peter Orszag from the Brookings Institution, Robert Pozen, whose Social Security plan has been praised by Bush, Joan Entmacher of the National Women's Law Center, Michael Tanner of Cato, and Peter Ferrara of the Free Enterprise Fund. Click here for witness testimonies. Committee Chairman Charles Grassley told reporters after the hearing that he wants to move forward with Social Security legislation. Republicans on the committee are planning to meet in two weeks to start coming with legislation that Grassley hopes will appeal to the Democrats on the committee, which include Senators Max Baucus (D-MT), Kent Conrad (D-ND), Jeff Bingaman (D-NM), John Kerry (D-MA), Blanche Lincoln (D-AR), and Ron Wyden (D-OR).
    While the Democratic senators seem to be united in their opposition to private accounts, Republicans are more splintered on the issue. During yesterday's hearing Craig Thomas (R-WY) questioned a move that would add trillions of dollars to our debt, and Olympia Snowe (R-ME) seemed opposed to personal investment accounts. She said, "Social Security became the bedrock of support for seniors in my state precisely because it's defined and guaranteed. What cost and what risk is it worth to erode the guaranteed benefit?"
    Click here and here for newspaper articles on the hearing as well as the Social Security rally that took place yesterday afternoon on Capitol Hill.

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    Another Strike Against Private Accounts

    On tuesday, Finance Committee member Orrin Hatch (R-UT) said that both he and Sen. Charles Grassley (R-IA) had "pretty much told the president he's not going to get carve-outs" in regards to Social Security reform. Senate GOP leaders seem to be coming around to the fact that Bush's Social Security plan is not politically popular enough for them to seriously pursue.
    Hatch, in fact, is promoting a plan that would let people contribute up to $5,000 per year into a personal account, with the government providing scaled matching contributions for those who make less than $80,000 annually. Hatch's proposal also provides financial incentives that would be added to the accounts of those who opt to defer their receipt of Social Security retirement benefits. And the debate for reform continues.
    Of note: On April 26th, at 10 AM, the Senate Finance Committee will hold a hearing on sustainable solvency, during which they will look at proposals for reform both with and without private accounts. Robert Pozen, a former member of Bush's 2001 Social Security commission, will testify. His plan for reform has garnered a lot of attention over the past few months.

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    4 in 10 SS Recipents Affected By Taxation of Benefits

    According to a new report by the Congressional Research Service, almost 4 in 10 Americans are affected by taxation of Social Security benefits.

    There are three tiers of income taxes on Social Security benefits. For married couples, with a total income of $32,000 or less, there is no tax on their benefits. For couples with income between $32,000 and $44,000, half of their benefits are subject to tax. For couples with income exceeding $44,000, 85 percent of their benefits are subject to income tax.

    For individuals, these levels are set at $25,000, $34,000, and greater than $34,000.

    The Senate-approved budget resolution includes language that would roll back a tax increase on Social Security benefits that was enacted in 1993, but the provision is not expected to survive a House-Senate conference.

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    Upcoming Social Security Legislation

    Next week Sen. John Sununu (R-NH) and Rep. Paul Ryan (R-WI) plan to reintroduce their bill on Social Security reform in Congress. Their bill includes payroll tax-financed individual accounts.
    Sen. Lindsey Graham (R-SC) is also moving ahead with work on his Social Security legislation. His bill will also include payroll tax-financed individual investment accounts, but unlike other GOP bills, will most likely propose to raise the retirement age for benefit eligibility. He is considering the age of 68 as of right now (the current retirement age is 67).
    Graham is also exploring various approaches to "progressive price indexing," an idea which is touted by in Robert Pozen's Social Security reform proposal. Pozen, a Democrat, was a member of Bush's 2001 Social Security commission. His plan, which is getting increasing favorable attention from President Bush, would protect the lowest-income seniors by keeping them under wage indexing but would gradually blend in price indexing until the seniors at the upper end of the income scale would be subject to full price indexing.

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