Gephardt Likes Supplement to Social Security

WASHINGTON — House Minority Leader Richard A. Gephardt (D-Mo.), showing new flexibility in the debate over Social Security’s long-term solvency, Tuesday said that he would allow workers to contribute voluntarily to individual investment accounts that they control.

Gephardt’s suggestion, the first of its kind by a major Democratic leader in Congress, opens the door a bit wider to enact some form of private accounts. He spoke at the opening of a two-day White House conference on Social Security’s financial future.

In Gephardt’s plan, the voluntary investment accounts would supplement today’s Social Security program, which is fed by a 12.4% payroll tax. The accounts could ease the pressure on the Social Security trust fund, which is projected to exhaust its surplus in 2032 and leave payroll taxes able to pay only 75% of benefits promised under law.

Gephardt and most congressional Democrats still staunchly oppose an idea that is gaining strength among Republicans and even some Democrats: carving out 1 or 2 percentage points of today’s payroll tax and permitting workers to invest it for their retirements. They worry about fraying the safety net that now keeps many elderly Americans from falling into poverty.

While Gephardt and other members of Congress from both parties paraded some of their favorite ideas in the ballroom of a Washington hotel, President Clinton remained firmly neutral, refusing to drop even a hint of what approach he favors.

“I’m prepared to do whatever it takes to move us forward but let’s agree [that] we have to march together,” Clinton said in opening the meeting. He called on his audience of 250 persons, including representatives from interested organizations as well as members of Congress, to put “progress ahead of partisanship, placing the long-term interests of the nation first.”

“Already,” the president said, “some are predicting that we are simply incapable of doing this in Washington. I am determined to prove them wrong. I hope every one of you are determined to do so as well.”

Clinton’s refusal to offer a proposal of his own has angered Republicans, who have insisted that he must lead the way through the minefield of Social Security solvency.

“Congress cannot pull together these diverse views,” House Ways and Means Committee Chairman Bill Archer (R-Texas) said in an interview after Clinton’s remarks. “Congress was not elected to lead on this. But the president has made it his No. 1 issue.”

The political challenge for both the Democratic president and the Republican Congress is to close the financing gap--the 25% of benefits in the year 2032--without drastic tax increases or benefit cuts.

For many Republicans, individual investment accounts represent a third way to close the gap: resorting to the financial markets to provide a faster rate of return than the Social Security surplus now earns from the Treasury securities that by law it must buy.

“What we will provide with Social Security is not just the security that comes with personal accounts but the opportunity to create wealth and to transfer that wealth from generation to generation,” said Sen. Rick Santorum (R-Pa.), one of the opening speakers at Tuesday’s conference.

Most congressional Democrats, by contrast, believe that the current system is sound and needs only minor adjustments to handle the flood of baby boomers who begin reaching Social Security’s retirement age (which will then be 66) in 2012.

“It is up to us not only to shore up the financial structure of Social Security but also to find new and imaginative ways to add to that foundation,” Gephardt said.

“Individual accounts can be part of this answer,” he said. “But in my view they should be voluntary and should be a supplement, not a replacement, for the foundation of Social Security. We need to build on our current retirement system.”

Today’s session will move behind closed doors so that some members of Congress from both parties can meet with Clinton administration officials and technical experts to discuss the details of different potential Social Security reforms.