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The Macon Telegraph

September 22, 2002 Sunday SZ EDITION

SECTION: A; Pg. 1

Social Security fight anything but social

by Don Schanche Jr. Telegraph Staff Writer

Wednesday, in a downstairs meeting room at Magnolia Manor, Calder Clay III served 20 senior citizens lemonade, cookies and a message: "I'm not going to mess with your Social Security, OK? I want to tell you real quick I'm not going to do that."

A few weeks earlier, in the dining room at St. Paul Apartments, Jim Marshall served punch, cookies and a similar message to another crowd of retirees: He too is out to protect Social Security. "It's the basic safety net we all need," he said.

The seniors at the two retirement centers welcomed the messages, but some said they still didn't know what Clay or Marshall plan to do about the program that they all depend on.

And in fact, the two men running for Congress have very different ideas about what it means to protect Social Security, the largest single source of income for most of the nation's seniors. In simple terms, Clay, the Republican candidate for Middle Georgia's 3rd District, favors letting workers invest some of their Social Security contributions in personal retirement accounts that might earn a better rate than the government now provides.

Marshall, the Democrat, believes that's a risky approach, and would instead leave the system as it is for the time being.

Their differences reflect a furious ongoing debate between the Democratic and Republican parties. And even as the nation braces for a possible war with Iraq, that disagreement about domestic policy is likely to surface in competing political advertisements in the weeks leading up to the Nov. 5 general election.

"This election will be a referendum on the future of Social Security, because the Republicans from the White House on down have made it clear they plan to privatize Social Security as soon as the elections are over," said Kim Rubey, a spokeswoman for the Democratic Congressional Campaign Committee.

"There is no plan to privatize," countered Lea Ann McBride, who speaks for the National Republican Congressional Committee. "(That word) has been introduced into the debate because the Democrats have polled and used it in focus groups and found it evokes an emotion and puts seniors in fear of their retirement, or near-retirees in fear of their nest egg."

In recent days, the national parties have released a blizzard of competing news releases on the subject. The Social Security debate has begin popping up in congressional campaigns all over the country.

It erupted last week in the midstate as the Clay campaign cried foul over a Democratic Party fund-raising letter that claims the Republicans plan to invest up to $1 trillion of Social Security resources in the stock market. Clay's campaign manager, Eric Griffin, said at least two voters in the district handed copies of the letter over to Clay.

The letter from Terry McAuliffe, chairman of the Democratic National Committee, tells voters, "Had their plan been in place over the last two years, it would have been a disaster of epic proportions. In 2000 the NASDAQ index fell more than 60 percent! Other stock market indexes also saw deep declines. And this year, stock market declines are destroying the retirement dreams of millions of Americans."

Clay's campaign contends there is no such plan and says McAuliffe's letter is a scare tactic directed against seniors. Clay asked Marshall to disavow McAuliffe's letter.

"Trying to scare someone with untruths and misleading statements just to score political points is bad enough, but to do this to seniors, our most valuable citizens, is appalling and shameful. I will not stand by while liberals like (U.S. House Minority Leader) Dick Gephardt, (U.S. Senate Majority Leader) Tom Daschle and Jim Marshall use cheap campaign tricks to scare our seniors," he said in a news release.

State Sen. Robert Brown, Marshall's campaign manager, insisted that the Republicans do in fact plan to privatize Social Security.

"When Republicans stop talking about and scheming to privatize Social Security, I'm sure Democrats will stop writing letters about it," said the Democrat from Macon.

So what are the facts?

Social Security

The Social Security system, which dates back to 1935, is the largest single source of retirement income for most of the nation's seniors. It also provides disability insurance for millions of Americans.

Each working American contributes a portion of income to the program; so do employers.

The system currently has more than $1 trillion in assets, invested in Treasury bonds. As America's population ages, with more retirees and fewer workers, the Social Security system will become strained. But officials with the Social Security program say the crisis is decades away.

While the system's expenditures will exceed tax revenue by 2017, the Social Security trust fund will take years to be depleted.

According to a report from the Social Security trustees, the system can continue paying full retirement benefits through 2041 and full disability through 2028.

President's commission

For years, critics of Social Security have suggested that workers could get a better return on their investment than the conservative Treasury bonds where the trust funds are now invested.

President Bush made Social Security reform a key part of his platform during the 2000 campaign. He said each young worker should be allowed "take some portion of his or her payroll tax and put it in a fund that invests in stocks and bonds."

In May 2001, Bush appointed a President's Commission to Strengthen Social Security. Last December, the bipartisan commission issued a lengthy report recommending several options - all of which involved the creation of personal retirement accounts. They would not replace Social Security. The funds would be created with only a portion of the taxes paid to Social Security. They would not represent a free-for-all of investment, but would be administered by managers, something like a mutual fund.

Republicans point out that nowhere in the report does the word "privatization" appear. They also say the plan is similar to the Thrift Savings Plan that federal workers are able to use.

Members of the president's commission concluded that personal accounts would help create wealth and provide a more generous retirement benefit than traditional Social Security.

But others charged that the plan would put retirement funds at risk, both for the investors in personal accounts and for the retirees who would have a shrinking pool of dollars to fund conventional Social Security. Instead of saving Social Security, they said, the commission's plan would actually harm it.

"We would argue that the problem with privatization is it will not enrich beneficiaries. It will probably impoverish them, particularly future beneficiaries," said Lee Goldberg, spokesman for the National Committee to Preserve Social Security and Medicare. The organization has endorsed Marshall for Congress.

Goldberg's group and other critics of the president's commission say the infusion of billions of Social Security dollars into the stock and bond market would end up enriching many traders and money managers, regardless of how it affected retirees. Instead of privatizing they recommend making smaller, incremental changes in Social Security funding. With the crisis of insolvency decades away, they say there is time for less radical solutions.

The term 'privatization'

Although Republicans now want to distance themselves from the word "privatize," that word was commonly used until recently by both parties to describe the personal accounts.

The president's commission included staff from the libertarian-leaning Cato Institute's Project on Social Security Privatization. It has since been renamed the Project on Social Security Choice.

The semantics changed after the stock market fell.

That's when Democrats stepped up their attacks linking privatization with high risk, and Republicans began backing away from the term.

"I know the Republicans are really big on the classics, but this is something that would make George Orwell proud," said Goldberg. "This is like saying black is white. Now they're turning around and saying it's not privatization."

Who is affected

The retirees who listened to Clay and Marshall at Magnolia Manor and St. Paul Apartments agreed on one thing: They already have their Social Security, and it's not likely to go anywhere. It's their children and grandchildren who will be affected by whatever Congress does.

Jose Molina, 25, is a maintenance worker at St. Paul Apartments. He hopes to complete a training program and become a paramedic. He doubts he will ever see a dollar of Social Security retirement money. He expects it will be gone by the time he retires.

"I'm not banking on Social Security," he said. "I'm going to make my own retirement."

He is of two minds about what Clay and Marshall are saying. He likes the idea of controlling his own retirement money. But as someone who often votes Democrat, he isn't sure whether he can trust the Republicans to do what they say.

As voters tune in to the debate over Social Security, the AARP - formerly the American Association for Retired Persons - has this advice: Pay attention.

"You still have to ask for specifics," said Bill Brown, a Georgia-based AARP spokesman.

"Don't just promise us you're not going to jeopardize (Social. Security) but tell us what you're going to do in Congress to protect it."

To contact Don Schanche Jr., call (478) 453-8308 or e-mail schanche@alltel.net.