WASHINGTON - While Congressional Republicans have endorsed President Clinton's proposal to set aside the bulk of the surplus to pay for Social Security, they are struggling to fill in the blanks of a plan to extend the life of the retirement program.
The Republicans have been mulling a number of proposals that would let individuals invest a portion of the Social Security funds in the stock market.
But they have a number of major decisions to make in the coming months as they ready their own plans.
They have to decide whether the private investment money should come from surplus funds, as the president has proposed, or part of the payroll tax now dedicated to Social Security.
They also must figure out whether the private investment accounts would be voluntary or whether to eventually phase them in for all beneficiaries.
They must deal with what many predict will be high costs of administering private accounts. And they also must wrestle with how to pay for the sizable transition costs of moving from the current system to an investment-based one.
While many Republicans say their plans will protect retirees from the gyrations of the stock markets by ensuring minimum benefits, critics say building in that kind of security is expensive.
"Guarantees cost money," said Henry Aaron, a Social Security expert at the Brookings Institute.
Aaron warned that letting individuals invest their Social Security funds in the market is too great a risk for many people who will eventually have to rely on that income in their old age or if they become disabled.
But proponents say that even by conservative estimates investing in the market will generate far greater returns for beneficiaries than the current system of having the government put the money in low yielding government securities.
In the coming weeks and months, Republicans are expected to unveil proposals based on that assumption.
On Thursday, Sen. Phil Gramm, R-Texas, will once again introduce an investment-based plan he hopes will become the basis of the reform effort in that chamber.
Gramm has proposed that 3 percent of wages be devoted to an investment-based system, from the 12 percent Social Security tax.
The Gramm plan would be mandatory for new workers but voluntary for everyone else. The senator has proposed that the surplus be used to pay part of the transition costs of continuing to pay full benefits to those enrolled in the old system while tax money is being diverted to private accounts.
Gramm, who has teamed up with Senate Budget Chairman Pete Domenici, R-N.M., predicted his blueprint will address critics' concerns.
"We believe we can develop a fully funded system" he said. " We think we can do it without having to cut Social Security benefits and without having to raise taxes."
On the House side, Ways and Means Chairman Rep. Bill Archer, R-Texas, has been working with Kenneth Kies, the former head of the Joint Committee on Taxation and now a consultant with Price Waterhouse accounting firm, to devise a plan.
While Archer aides would not say what may be in that plan, they said it would not include President Clinton's proposal to let the government invest a portion of Social Security funds in the stock market.
Critics claim that such an approach would give the government too much clout in the private sector and would be susceptible to political meddling. They fear that lawmakers would put pressure on the system to either invest or divest in certain companies based on non-financial factors, such as what products they make or where they operate.
President Clinton's advisers, however, say they would insulate Social Security from such meddling by creating an independent board to make the investments.
Deputy Treasury Secretary Lawrence Summers also recently testified that having the government invest the funds would entail lower overhead costs than individual accounts.
Some estimates have projected that the administrative costs for individual private market accounts could be as high as 20 percent of the investment, at least in the early years.
Clinton has also proposed a small private investment program, which would be funded by dipping into 12 percent of the surplus. The program, called USA Accounts, would be targeted to middle-class taxpayers.
However, the administration has not provided details of those accounts, saying they will be forthcoming at a later date.
Both the White House and Congressional Republicans are vowing to work together to devise Social Security reform but so far the only substantial area of agreement is setting aside the surplus, which is projected to be $1.8 trillion over the next decade.
Ways and Means spokesman Ari Fleischer said that Archer attempted to set up a meeting with the president earlier this year but was rebuffed by the White House.
"The chairman was advised by the White House it was premature," Fleischer said.
With only a slim GOP majority in the House, Fleischer said, the chairman is hoping to devise a plan that will attract conservative and moderate Democrats.
![[socialsecurity.org]](G/Libertarian/socsec_banner.gif)
