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Professors react to Bush plan

EVAN CARAVELLI/Arizona Daily Wildcat
President Bush pitches his plan for Social Security reform to a packed house at the Tucson Convention Center Monday. Some UA professors are among those skeptical of the Bush's proposed reform of the current system, which includes a provision for incorporating personal retirement accounts.
By J. Ferguson
Arizona Daily Wildcat
Wednesday, March 23, 2005
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UA professors in several disciplines said they are skeptical of Bush's plan to prioritize Social Security.

Gerald Swanson, a professor of economics and the Thomas R. Brown chair in economics education at the Eller College of Management, said Bush's plan to use personal accounts does not address the solvency issue of Social Security.

Projections by the Congressional Budget Office suggest that, by 2018, Social Security will become insolvent with more money going out in payments than collected in taxes.

"Personal accounts could be a nice thing, but they are not the answer," Swanson said. "They actually leap frog (the insolvency) by taking money out (of the Social Security fund) when we need it the most."

Swanson, who recently wrote a new book called "America the Broke," a critique on the American economy, said the insolvency was the real issue facing Social Security.

A former government consultant on Social Security, Swanson said there are only a few options to solve the insolvency issue.

Swanson suggested one way to fix Social Security would be to means test beneficiaries, or to scrutinize individuals on whether they need Social Security. To help fix the problem, he suggested phasing out of the system or reducing recipient benefits with yearly retirement incomes in excess of $150,000.

"We need to try and protect the person that makes $4,000 a year," Swanson said. "The ones that will depend heavily on that for retirement."

Other options, Swanson said, would be to delay the age requirement, reduce some benefits to recipients or to increase the payroll tax. Payroll taxes are collected to pay for Social Security benefits.

"(Future generations) would have to pay much higher in taxes," Swanson said. "Private accounts won't help."

Swanson said he is concerned the Social Security discussion is focused too much on the issue of retirement benefits.

"There are a lot other things separate from retirement," Swanson said.

Social Security distributes money to orphans, widows and the disabled.

The lack of a dialogue about other beneficiaries also worries history professor Michael Schaller.

"It's unclear whether they cover them under his plan," Schaller said.

Schaller said it is important to note 17 percent of Social Security benefits are paid to non-retirees.

"What Bush is proposing is ending Social Security," Schaller said.

What President Franklin D. Roosevelt started in 1935 was a social insurance program, designed to lift the elderly out of extreme poverty, Schaller said.

"They retired on nothing (in the '30s)," Schaller said.

Schaller said the program was originally designed to help supplement the elderly when they retired, and at the time, the program was cheap due to short life expectancies and a huge workforce pool to collect payroll taxes.

In the early 1940s, "most people collected Social Security for three or four years and then they died," Schaller said.

Schaller said Bush is labeling the future insolvency as a political ploy to move Social Security from a social insurance program to private, individual retirement accounts.

"It's a dishonest debate. It's a bait-and-switch," Schaller said.

Schaller said personal accounts do not change the solvency issue.

"The sense there is a crisis is nonsense," Schaller said. "The bigger issue is it doesn't do anything to make it solvent in 40 years (when government projections suggest the insolvency can no longer be covered by government bonds)."

Arthur Silvers, the director of the School of Public Administration and Policy, said personal accounts are one of several options long been discussed in public policy circles.

Silvers said the flaw in personal accounts is they detract from the original mandate of Social Security.

"The original intent was to deal with low income retirees, so they wouldn't become destitute," Silvers said. "The problem with privatization is that there is no redistribution of wealth."

Silvers suggested if personal accounts are adopted, the federal government will need to put a program in place to cover orphans, widows and the disabled.

"Nobody is talking about them," Silvers said.

Silvers said the program in its current state needs to be fixed and legislatures will have to reduce benefits, delay the age requirement, increase payroll tax or lift the cap for payroll taxes. Currently, those making more than $90,000 a year do not pay payroll taxes.

"Something has to give," Silvers said.

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