ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Tuesday, January 7, 1997 TAG: 9701070091
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Billions of dollars in Social Security money would be invested in the stock market rather than in guaranteed government bonds under proposals put forward by a splintered government panel.
A year behind schedule, the Social Security Advisory Council released its final report Monday on how to rescue the government's biggest benefit program from bankruptcy in the next century.
However, the panel produced three options instead of one.. All three plans would seek to boost workers' retirement nest eggs by allowing Social Security funds to be invested in the stock market.
But the three plans differed sharply on how those stock investments would be handled. One option would have the government invest up to 40 percent of the Social Security trust fund in the stock market but not allow individual workers any choice in the investments.
The other two options would create individual accounts, similar to the current tax-deferred Individual Retirement Accounts, and allow workers to make choices on how the funds are invested.
While all three groups came out in favor of stock market investments, the group arguing that the government should make the investments called a news conference as soon as the report was released to blast the other two proposals and vow to actively work to defeat those ideas as a threat to the financial security of lower-income Social Security recipients.
``There is no compelling argument for abandoning the traditional Social Security program for a system of individual private savings accounts,'' said former Social Security Commissioner Robert Ball. ``Social Security is not in the emergency room and does not require radical surgery.''
The high level of disagreement made it clear that no major changes in Social Security would be forthcoming quickly from Congress although key Republican leaders praised the panel for underscoring the need to address looming problems.
House Majority Leader Dick Armey, R-Texas, said the fact that all factions on the council supported increased reliance on private markets represented a major shift in thinking.
House Ways and Means Committee Chairman Bill Archer, R-Texas, praised the panel for coming up with ``new and wide-ranging structural changes'' and pledged to support President Clinton if he decides to create yet another commission, this time a bipartisan commission to develop a specific set of recommendations.
At the White House, presidential spokesman Mike McCurry expressed disappointment that ``there's no easily found consensus'' on Social Security but said Clinton remained committed to a ``thoroughly bipartisan process'' to find solutions that would include Congress, the White House, retirees and workers.
The amount Social Security collects in payroll taxes exceeds annual benefit payments by $60 billion, but by 2012, that surplus will end as the baby boomers start retiring. Without corrective action, the Social Security trust fund will be broke by 2029. At that point, payroll taxes will cover only about 76 percent of promised benefits.
Supporters of privatization, investing Social Security taxes in the stock market, argue that stocks traditionally have paid much higher returns than U.S. Treasury securities.
Opponents argue that the stock market carries big risks and would leave many retirees in the lurch if investments plummet.
The three competing plans were laid out as separate options in the final report.
Option No. 1, called the ``maintain benefits'' plan, was supported by Ball and five other panel members, including the panel's labor union representatives. It would make the fewest changes in current benefits and tax rates. It suggested further study aimed at investing up to 40 percent of Social Security funds in the stock market, arguing this would offer a higher rate of return than the current approach where 100 percent of Social Security trust funds are invested in Treasury bonds.
A second option, labeled ``individual accounts,'' would increase Social Security payroll taxes by 1.6 percent of payroll, with the new money invested in individual accounts on behalf of workers, who could chose from a limited number of options. The current Social Security payroll tax is 12.4 percent, half paid by the worker and half by the employer.
A third option, called ``personal security accounts,'' proposes the most radical changes. It would divert 5 percent of a worker's Social Security payments to the private sector and allow individuals to decide where to invest their money. To pay for the costs of moving to this system, it would increase the payroll tax by 1.5 percentage points.
Gloria Johnson, a member of the commission and supporter of the Ball approach, charged that the other two options represented a ``twin-headed monster supported by Wall Street and its right-wing think tanks.''
LENGTH: Medium: 91 lines ILLUSTRATION: PHOTO: (headshot) Ball. color.by CNB