About 100 people, including students in the Philosophy, Politics and the Public honors program, listened as Portman and Deputy Commissioner for Social Security James Lockhart presented President Bush’s case for reform in the Conaton board room in Schmidt Hall.
They didn’t buy everything they heard. “Can Americans really be expected to save more?” “Why don’t you just get rid of Social Security altogether?” “How will you fund the shortfall in the Social Security Trust Fund?” “What about those people who don’t know as much about what to do with their money?”
Others came away confident in their government’s ability to make it work.
“I have an immense faith in the American public to respond to the needs of people," said Sara Rowell, a sophomore in the honors program.
The forum was one of several presented during a week-long Congressional break to sell Bush’s plan that would allow younger workers to divert a portion of their Social Security payroll taxes into private personal investment accounts. It was organized at Xavier by political science instructor Gene Beaupre, who is teaching part of the honors program, so his students could engage in an ongoing political issue.
“People didn’t walk out with any certainty,” Beaupre said. “This is a complicated issue and what has to happen is what happened here – a thorough public debate on it and a lot of different points of view on every aspect. There’s not even consensus on the estimates.”
Portman outlined the history of the Social Security system, created 70 years ago by President Franklin D. Roosevelt to supplement, not replace, Americans’ retirement plans. Predictions are that Americans’ increased longevity, a declining birth rate contributing to fewer workers and the pending retirement of the large Baby Boom generation will cause the fund to go into the red in 2018 and to run out of money for full benefits by 2042.
“It’s an unsustainable, pay-as-you-go system,” Lockhart said. “We need $3.7 trillion today to cover a 75-year shortfall, and to really fix it we need $10.4 trillion to achieve solvency. We need to fix it for your generation.”
Possible solutions include increasing the payroll tax rate, raising retirement age and lowering benefits. Another is to extend the cap on taxable annual wages from the current $90,000 to $140,000.
But the topic generating the most interest – and controversy – is Bush’s proposed private investment accounts. Social Security now averages a return rate of 1.8 percent. But a select group of conservative private investments could earn more than 4 percent for those individuals who choose that option, they said. Workers below age 55 would be allowed to divert a portion of their normal Social Security taxes into these accounts to supplement their retirement benefits.
Such a plan, Lockhart said, “would create a system that stays solvent forever without having to pay any additional taxes.” The downside is that the shortfall in the Social Security trust fund would have to be funded somehow.
“We’re thinking of looking at Social Security in more creative ways and making sure it’s there for future generations. I think personal accounts are part of the solution,” Portman said. “But we need to make sure we still have a basic safety net.”
History Professor Alexandra Korros challenged the plan for its lack of details, particularly how the shortfall, which would worsen as funds are diverted out, will be paid back. Portman said it would have to come from general fund borrowing.
The program was clearly aimed at college students, dubbed the Millenial Generation, who would be the target group for the new personal accounts. The American Association for Retired Persons is lobbying against the personal accounts as a solution, arguing they would devastate the fund sooner than if it was left alone and threaten benefits paid to the disabled. The organization is urging more modest adjustments that would extend the life of the system and keep it solvent without jeoparding anyone's benefits.
“One of the things Portman made clear to me is they’re trying to get college students interested in this,” Beaupre said. “I thought my students did very well and a number of them had a lot of questions they didn’t get a chance to ask. I was pleased because the fundamental purpose of this is for students to understand the complexity of the issues and the relations between the executive and legislative branches and just to be part of a public debate like that.”