Now that D.C.s oracleHe Who Moves Markets And Can Speak No Wronghas given his cautious approval to President Bushs proposal to create private investment accounts in Social Security, the President may regain some traction in his reconfiguration push. But I wouldnt expect that the pronouncements of Federal Reserve Board Chairman Alan Greenspan are, in this case, going to substantially change the dynamic of the ongoing debate on changing Social Security.

That dynamic has not been going particularly well for the President in the last few weeks. As Mr. Bush turned up the rhetoric on how Social Security was in a crisis situation, there was more and more investigation into the actual financial state of the program. Result? Less talk about a crisis.

There also was more investigation into how much it would cost to implement some of the fixes that have been floated. This includes accumulating debt as well as cutting benefits. Result? Cold feet on the part of members of Congress who would have to do the actual voting on any changes.

In any case, what Greenspan gave with one hand, he took away with the other. So, he did tell the Senate Banking Committee, “If youre going to move to private accounts, which I approve of, I think you have to do it in a cautious, gradual way.” But he also said that private accounts would not be anything in themselves to solve Social Securitys financial shortfall.

Its also been reported that the President might be open to raising or eliminating the cap on earnings that are subject to the Social Security payroll tax. That cap is $90,000 for the year 2005.

Many commentators have said this move alone would largely if not totally eliminate whatever shortfall Social Security is predicted to have in the next 75 years. Well see if Mr. Bush maintains that openness once the anti-tax hounds get the scent.

I am absolutely fascinated to see how this whole debate on Social Security is going to resolve itself. It is huge and for political junkies such as myself its like manna from heaven.

Judging from the mail Ive gotten from two earlier columns on Social Security, it is apparent that everyone has an opinion on the issueand that no two opinions are exactly alike. This is something that nearly everyone has an emotional investment in, whether positive or negative.

Ive gotten mail from people who are against the programperiod. I dont know whether they were around when FDR signed it into law, but they are vociferous in not being able to abide itnever did, never will. I have to be honest. These people scare me in their denial of any kind of social responsibility for others.

On the other end of the spectrum are those who think the program needs only minor tweaks in order to be financially healthy.

Then there are those who bemoan the low returnaround 2%on the money collected for Social Security. These people feel the market would do much better over time, especially for young people. Maybe these people have never been burned by the market. Or if they have, Id like to know how theyve recovered their equanimity to the extent they profess.

Then there are those who feel it is unfair to burden younger people with having to support Social Securitys pay-as-you-go system, even as there is uncertainty about these younger peoples potential benefits.

Then there are those who are against private accounts because they would accumulate a mountain of debttrillions of dollarsin transition costs that would crush future generations with huge interest payments.

One thing is for certain, and that is that a broad consensus will have to be reached in order to make any substantial and significant changes to Social Security. A squeaker vote in either chamber of Congress just aint going to do it. Nor should it.

Steve Piontek

Editor-in-Chief


Reproduced from National Underwriter Edition, February 18, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.