2008 Woodie Awards
Reform will be difficult and complex
Dane Schumann
Issue date: 3/31/05 Section: News
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President George W. Bush's most recent visit to Kirkwood Community College was part of an ongoing public relations battle between the White House and national Democrats to promote a Social Security reform plan that the president has wanted to install since he first took office in 2001. Bush has been traveling the country from coast to coast in what has become an excruciating uphill battle to garner popular support for proposed changes that are unpopular among many seniors.
The administration had to hurdle early on was the misconception that there wasn't any problem with the way the current system is financed. The issue died out three weeks ago however when the Senate unanimously voted that the system was facing a problem and effectively promised to work on solutions. While the exact time of when the current system will face insolvency is unclear, the reason for its inability to pay beneficiaries in the future is quite simple.
Social Security is not necessarily a trust fund. It functions in a much different way. The program is set up to accumulate money from taxpayers and to redistribute that income to eligible beneficiaries. A recent CBO report said that problem may likely occur as soon as 2018 when a substantial amount of baby-boomers retire and more people become eligible for benefits by turning 65. The affects are felt in two ways; a large number of people who used to pay into the system are no longer paying in and are instead receiving benefits.
Where the difference between the two sides comes out is when the idea of personal accounts comes into the equation. The administration has made an effort to make its position on personal accounts more clear by stating that they would only be an optional supplement to the regular benefits provided by the system. Another piece of the debate has been the cost of implementing the personal accounts into the system. Many congressional Democrats have voiced their opposition to such an implementation, citing the growing federal deficit and a likely implementation cost that would soar into the trillions. Conversely Federal Reserve Board Chairman Alan Greenspan has made his support of personal accounts well known during congressional committee hearings in recent months. Greenspan has urged caution however, saying that such a large influx in the number of shareholders and bond owners could trigger a larger than normal market boost, which would make the market itself more susceptible to a violent crash.
The administration had to hurdle early on was the misconception that there wasn't any problem with the way the current system is financed. The issue died out three weeks ago however when the Senate unanimously voted that the system was facing a problem and effectively promised to work on solutions. While the exact time of when the current system will face insolvency is unclear, the reason for its inability to pay beneficiaries in the future is quite simple.
Social Security is not necessarily a trust fund. It functions in a much different way. The program is set up to accumulate money from taxpayers and to redistribute that income to eligible beneficiaries. A recent CBO report said that problem may likely occur as soon as 2018 when a substantial amount of baby-boomers retire and more people become eligible for benefits by turning 65. The affects are felt in two ways; a large number of people who used to pay into the system are no longer paying in and are instead receiving benefits.
Where the difference between the two sides comes out is when the idea of personal accounts comes into the equation. The administration has made an effort to make its position on personal accounts more clear by stating that they would only be an optional supplement to the regular benefits provided by the system. Another piece of the debate has been the cost of implementing the personal accounts into the system. Many congressional Democrats have voiced their opposition to such an implementation, citing the growing federal deficit and a likely implementation cost that would soar into the trillions. Conversely Federal Reserve Board Chairman Alan Greenspan has made his support of personal accounts well known during congressional committee hearings in recent months. Greenspan has urged caution however, saying that such a large influx in the number of shareholders and bond owners could trigger a larger than normal market boost, which would make the market itself more susceptible to a violent crash.