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Absender : meisenscher@igc.apc.org (Michael Eisenscher) Org.-Empf. : LABNEWS@CMSA.BERKELEY.EDU Weiterleiter owner-labnews@CMSA.BERKELEY.EDU Antwort an : LABNEWS@CMSA.BERKELEY.EDU Betreff : Deal Emerging on Social Security "Reform" Datum : So 29.03.98, 22:50 (erhalten: 30.03.98) Groesse : 10816 Bytes ----------------------------------------------------------------------
One Outline for Future of Social Security Seen in Recent Bill
Richmond Times-Dispatch Sat, Mar 28 1998
The "national dialogue on Social Security" has barely begun, but the outlines of the future system already may be visible.
They're in legislation to save Social Security recently introduced by Sens. Daniel Patrick Moynihan, D-N.Y., and Bob Kerrey, D-Neb.
Social Security would continue much as now, but workers could supplement it with personal retirement accounts financed by proceeds of a 2-percentage-point cut in the payroll tax.
Other changes would help pay for the tax cut - $800 billion over 10 years - and help put the system on a sound financial footing.
Even Republicans are complimenting Moynihan and Kerrey for having the guts to say where changes likely must be made.
Senate Republican whip Don Nickles of Oklahoma said that, while much of the proposal will be unpopular, it "has taken some giant steps in the right direction."
Those steps include:
* A tax cut. The payroll tax for Social Security - including employee and employer portions - would be cut from 12.4 percent to 10.4 percent.
Although fewer workers per retiree will be contributing in the future, Moynihan says that, with the other changes being proposed, it won't be necessary to raise rates for 40 years.
The tax cut would leave Social Security as a pay-as-you-go system, dropping the current pretense that money is being saved in a trust fund for future retirees.
* Partial privatization. People could do what they please with their tax cut, but they would be encouraged to put it aside for retirement.
Moynihan says that a steelworker after 45 years could "easily find himself with an estate of half a million dollars." Half a million will be worth less then, but it'll still be a lot.
Others insist that such a savings plan be mandatory, not optional.
* A cut in COLAs. The consumer price index overstates inflation by more than a percentage point, according to most economists. The legislation would reduce annual cost-of-living adjustments given to Social Security beneficiaries by one percentage point.
* An increase in the retirement age. The retirement age is currently being increased, over time, to 67 for those turning 62 in 2022. The legislation would increase it to 68 in 2017 for those reaching age 62 that year.
* A higher limit on income taxed. Social Security taxes apply only to the first $68,400 of wages this year. Indexed to annual growth in average wages, this is expected to increase to $82,800 by 2003. The legislation would increase the taxable amount to $97,500 by 2003.
There are other changes. Social Security benefits would be taxed the same as private pensions, which are taxed on benefits that exceed a worker's contributions. Newly hired state and local employees would be taxed.
Politically, all these ideas are explosive.
Cutting the payroll tax to turn Social Security into a pay-as-you-go system means the government no longer would be able to raid it to pay for other programs. Shifting money from Social Security to private accounts invested in the stock market would undo part of the safety net that Social Security provides against a repeat of the 1929 crash.
Reducing COLAs would leave the elderly more vulnerable to hardships. Increasing the retirement age would fall hardest on black males, whose life spans are shorter than others'.
And there has always been a fear that subjecting more upper income to the Social Security tax would cost the program political support among the well-off, who already get a smaller return on their payroll taxes than do others.
But Moynihan says that without the changes, the program eventually will lose support anyway.
Those who are fighting change, he said, "can go on in this manner if they choose. But if they do, in 30 years time Social Security as we have known it since 1935 will have vanished."
It's happened before, he said. "The veto groups that prevented any change in the welfare system ... for so long looked up one day to find the system had vanished."
(Copyright 1998)
_____via IntellX_____ Copyright 1998, Richmond Times-Dispatch
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Last Modified: April 20, 1998