Saturday, September 6, 2008
McCain, Obama Split Over Social Security - WSJ
Presidential contenders John McCain and Barack Obama offered very different visions for solving Social Security's financial problems Saturday in separate appearances before AARP, a Washington lobby that advocates for older Americans. Sen. McCain, the Republican nominee, said he remains open to personal accounts, also called private accounts, for younger people. Under this system, pushed hard by President Bush in 2005, workers could divert some of the taxes that normally would go to pay Social Security benefits into personal accounts invested in stocks and/or bonds. In trade, their guaranteed checks from the government would go down, increasing both the possibility of risk and reward for participants, depending on how the investments fare. "There may be a role for private investment accounts for younger workers as long as they are not a substitute for insuring the solvency of the system and does not affect the system,'' Sen. McCain said. This could help balance the books long term because government obligations would drop. But Democrats were unified in killing the Bush plan, and Sen. Obama, the Democratic presidential nominee, says he remains deeply opposed. "Privatizing Social Security was a bad idea when George Bush proposed it, and it's a bad idea today. It would take the one rock-solid, guaranteed part of your retirement income and gamble it on the stock market," Obama said. McCain spokesman Tucker Bounds charged that Obama was willing to "misinterpret the facts to scare seniors for political points." Both candidates, appearing from the campaign trail by satellite, pledged to work across the aisle to restore the program to fiscal health. "I'm committed to protecting and preserving Social Security and I won't hand it off to another generation," Sen. McCain said. "It is broken and you know it and I know it. Republicans and Democrats gotta sit down and fix that system. We can't do that to next generation of Americans." Analysts project that without changes, by 2041 the program will have depleted reserves that are, on paper, set aside for benefits. Sen. McCain noted that the longer it takes Congress to make changes, the more radical those changes will have to be. The basic problem: there are fewer workers to support each retiree than there used to be. The problems affecting Medicare, the health care program for seniors, are even more acute. Actuaries projected in March that its hospital insurance trust fund would be exhausted in 2019. But fixing Medicare is considerably more complicated, mostly because the government will have to find a way to slow spending on health care, a major challenge. When it comes to Social Security, politicians don't much like to talk about what it would take to fix the problems because none of the choices are politically attractive. There are basically two options: raise taxes to collect more money, or cut benefits, such as by raising the retirement age or decreasing the rate at which benefits increase in value. Even personal accounts, putting aside their wisdom, carry huge transition costs as young people divert their money away while the government still pays out benefits to current retirees. Sen. McCain has vacillated when describing his position. At times he has declared forthright that he will not raise taxes, period. Other times he has said that everything would be on the table in a bipartisan negotiation. McCain spokesman Tucker Bounds said today in a statement: "McCain prefers an 'everything is on the table' approach to urging a saving Social Security compromise." Sen. Obama has been much more forthright about how he would bring the program into balance. He says he'll raise taxes of those earning over $250,000 a year. It's not clear whether that would be enough to close the entire gap. "I'll work with members of Congress from both parties to ask people making more than $250,000 a year to contribute a little bit more to keep the system sound," Sen. Obama said. "It's a change that would start a decade or more from now, and it won't burden middle-class families. In fact, 99% of Americans will see absolutely no change in their taxes -- 99%."