A rising din over Social Security

Fixing the system has become No. 1 issue, but no consensus exists on the best way

A strange dynamic is rising around the debate over Social Security. For both major parties, eager to accomplish something in the next Congress, ensuring the long-term viability of Social Security has emerged as issue No. 1.

The White House will convene a splashy conference on Social Security Dec. 8 and 9. President Clinton will likely make it the centerpiece of his State of the Union address in January. And more and more players are jumping in with proposals for how to fix the system - from members of Congress to think-tank thinkers to former presidential economic advisers.

But the hotter the debate, the more remote are the chances for any major change to the system. "It's very hard to see a path to a plan that has anything close to consensus," says Dean Baker, an economist at the Economic Policy Institute in Washington.

Part of the problem is that so far, the debate has only highlighted the vast differences in the proposals, which range from full privatization of the system to keeping the federal retirement plan essentially the same, with some tweaks.

There's also a giant hole in the middle of the discussion: Mr. Clinton has assiduously avoided putting forth any plan of his own, leaving the debate without a focal point - and also depriving Republicans (and feisty Democrats) of a target to shoot at, a lesson Clinton learned from the 1993 debate on health care. The Republicans, in turn, have avoided coalescing around any particular plan, although many proposals contain the private accounts they generally support. Their own lesson comes from the experience of proposing changes to Medicare, which Democrats seized on to beat up the Republicans in the 1996 campaign.

Congressional Democrats tend toward the milder solutions, such as raising the cap on wages subject to Social Security taxes (currently at $68,400). But like their political brethren, they too have avoided supporting any one plan.

Like that reluctant vaudeville duo, Alphonse and Gaston, the three points of the triangle are graciously inviting the others to go first: So far, no one's budged.

Participants at next week's White House conference, who will represent the range of opinion, expect the sessions to be more show and tell than brass-tacks negotiating. Clinton himself is not expected to unveil a plan.

Another factor that mitigates against dramatic change is a lack of consensus on whether there's even a crisis at all. Under current projections, Social Security will be unable to meet its monetary obligations in full in the year 2032. That's not exactly imminent. The last time Social Security was in trouble, in the early 1980s, the system was months away from default and borrowing from the Medicare trust fund to stay afloat.

Some activists argue the crisis is not one of solvency. "The real crisis is that young workers are going to receive a terrible payback" on the money they put into the system, says Michael Tanner of the Cato Institute. Most young workers will receive a negative or zero rate of return on payroll tax, he adds. Mr. Tanner proposes turning Social Security into a system of private accounts that are invested in stocks and bonds.

Debate turns partisan

In reality, though, young people aren't storming the barricades for change just yet. During this fall's election season, the term "crisis" was more often used for partisan purposes - for the Republicans, to push for privatization, for the Democrats, to argue for saving the budget surplus and blocking tax cuts.

The real reason to fix Social Security now, economists say, is that the sooner it's done, the less expensive and painful the remedy. In addition, the political and economic forces are right for change: The economy is strong, the budget is in surplus, and Clinton doesn't face the pressures of reelection. The large baby-boom generation, ready to enter the system in about 10 years, presents a ready-made constituency that can push for change.

Clinton has hinted he'd support some form of private accounts, but if he did come out firmly for a major plan involving such accounts, he would face the wrath of core Democrats - unionists, minorities, and liberals. These groups say private accounts represent an abandonment of society's obligation to the elderly and infirm. This is also the constituency that gave Clinton a five-seat Democratic gain in the House of Representatives in November's election - a fact these activists won't let Clinton (or Vice-President Gore) forget.

In recent weeks, labor has made clear it's in the debate by mobilizing members to defeat privatization. Polls show the public is interested in the notion of private accounts, but not in risking basic Social Security benefits to stock-market fluctuations.

The cost of reform

David Smith, a policy analyst at the AFL-CIO, describes the enormous challenges of educating the public on the issues facing Social Security. At first, he says, privatization had "a bit of a free run" in the public debate and got to "pretend" it was cost-free. Now, he says, word is out that privatization plans also call for an increase in the retirement age and smaller cost-of-living increases, amounting to reduced benefits.

In the end, congressional Democrats may try to postpone any deal until after the 2000 elections, when they hope to retake control of the House of Representatives. But for Clinton, the time is now. Most analysts say that realistically, he has only about eight months left in which to make any policy changes. After this time, the 2000 presidential race will engulf all policy discussions.

Tanner, of the Cato Institute, thinks Clinton may just go for some privatization to secure his legacy. "He'll never be remembered as the guy who adjusted the COLA formula," says Tanner, referring to cost of living adjustments. "But the guy who created 'Clinton accounts,' that's a whole different thing."

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