ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, October 10, 1996 TAG: 9610100073
SECTION: NATIONAL/INTERNATIONAL PAGE: A-6 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Whenever Social Security comes up, President Clinton and Bob Dole gingerly promise not to touch it. But away from the campaign, armies of researchers are amassing arguments to make sure the next president does take action to keep the system solvent.
The most radical reforms would have Social Security ``touched'' in a big way - by privatizing at least part of the $400 billion collected each year.
Instead of putting the money from workers' and employers' payroll taxes into government bonds - the only option now - some money would be invested in the stock market, where it could earn a higher return but also face greater risks.
A government advisory council, working out of the spotlight for two years, will produce its report soon after the election. The 13 members could not agree on a single remedy but instead will put forward three rival plans - all relying to some extent on privatization.
Meanwhile, both Clinton and Republican challenger Dole have endorsed the idea of appointing a commission along the lines of a 1983 panel that dealt with an earlier crisis in the government's biggest benefit program.
Clinton's and Dole's views on possible changes are pretty much a mystery, given their terse comments during the campaign. The subject did not come up, for example, in Sunday's debate.
One possible hint: Carolyn Weaver, a longtime Dole adviser on Social Security who also serves on the advisory council, supports the most far-reaching privatization plan to divert $1.6 trillion of Social Security contributions into stocks. Individuals, not the government, would decide how to invest the money.
Clinton and Dole both expressed a willingness to look at raising the retirement age. It is now scheduled to rise from 65 to 66 in 2010 and to 67 in 2025.
Of the three plans that will be advanced by the advisory council, one would have the government invest $800 billion of Social Security money in stocks over a 15-year period. The other two plans would allow workers to make the investments themselves.
A recent poll by the Employee Benefit Research Institute indicated that 65 percent of respondents favored putting some Social Security money into stocks. Fifty-nine percent said they wanted to pick the stocks themselves.
One reason is the growing fear among younger workers that Social Security, the Depression-era program to combat widespread poverty among the elderly, won't be around when they retire.
There is a basis for that fear.
This year, the amount of money the government collects for Social Security will exceed, by $60 billion, the amount it must pay in benefits. But starting in 2012, as the baby boomers retire, the fund will pay out far more than what it takes in each year, leaving it broke by the year 2029.
At that point, payroll taxes will cover only 76 percent of promised benefits.
The advisory committee, looking at those depressing figures, sought ways to fix the problem.
One idea, supported by longtime Social Security champion Robert Ball, would divert 40 percent of Social Security tax collections from the years 2000-2015 into stocks. That would be an estimated $800 billion, after adjusting for inflation.
But there are many skeptics. Some worry about undue influence if the government controlled roughly 10 percent of the nation's stock shares. Others call the earnings projections too optimistic.
``The idea that we can privatize our way out of this problem is not realistic,'' said Peter G. Peterson, former Nixon commerce secretary and the author of a book called, ``Will America Grow Up Before It Grows Old?''
He suggests raising the retirement age, reducing benefits for the well-off and taxing all Social Security benefits like other pension income.
The lack of presidential debate this year on the topic could turn out to be a blessing, argues Edward Gramlich, the panel chairman and a University of Michigan economics professor. Gramlich backs a compromise plan between the Ball- and Weaver-supported solutions.
``There is a risk,'' he said, ``that if these plans are discussed in the heat of a presidential campaign some good ideas might get tainted and not taken seriously after the election.''
LENGTH: Medium: 82 linesby CNB