Thomas Throws Cold Water On Bush Social Security Reform Plans
The life insurance industry was buoyed last week when the powerful chairman of the House Ways and Means Committee labeled President Bushs call for reform of the Social Security program a “dead horse” and suggested that a more viable alternative would include adding a savings plan for long term care or chronic care as “an augmentation to Social Security payments.”
At the same time, a securities firm in Washington that advises institutional investors cautioned that the death of the Social Security reform proposal would bring into play a compromise that could include establishment of Lifetime Savings Accounts, which are anathema to the life industry, as well as Retirement Savings Accounts.
In a note to investors, Tim VandenBurg, of Washington Analysis, said the Bush administration proposed these accounts last year and will likely push for them again this year. “Should the administrations push for broad tax code and Social Security reform bog down, the enactment of LSAs and RSAs would represent a second best form of tax and retirement security reform that the administration could point to as a policy achievement,” VandenBurg said. “By creating a highly flexible savings vehicle that effectively eliminates taxes on the investment income of small investors, this proposal should boost the savings rate and hence inflows into the capital markets.”
Even before President Bush proposed reform of Social Security by possibly creating private accounts and lessening benefits, Rep. Bill Thomas, R-Calif., chairman of the Ways and Means Committee, which will be the gateway for passage of any plan, called it a “dead horse” because of opposition from Democrats. Instead, he suggested that Congress undertake a broader evaluation of the tax incentives needed to deal with an aging nation that include adding a savings plan to pay for LTC and chronic care coverage.
“What Im trying to get people to do is get out of the narrow moving around of the pieces inside the Social Security box,” Thomas said at a forum on Bushs second term last week. “If we miss this opportunity…I think we will have missed an opportunity that may not present itself for another 20 years.”
The implication of Thomas and VandenBurgs comments is that tax changes that would enhance the marketing of insurance industry products are in play but that intense lobbying will be needed to ensure that Congress and the Bush administration keep the industrys needs in mind when drafting legislation dealing with retirement security.