Social Security Panel Can’t Agree On Fixing System

For 2-1/2 years, members of a federal advisory panel on Social Security argued, disagreed and argued again. Still without consensus, the group presents this month three opposing plans to save the doomed system.

Some panel members said Sunday that’s what they were supposed to do. Others disagree.

“We were charged with coming up with general approaches,” said panel member Sylvester Schieber, who supports a plan to restructure the program to rely on individual investment accounts. “Now the report goes to Congress and the administration, and they’ll decide what to do.”

Member Gerald M. Shea demurred. He said the report offers “nonrecommendations” because the proposals differ so widely.

“I think it absolutely was a total failure,” said Shea, assistant to the president of the AFL-CIO. “If we had been honest with each other, we would have closed up shop last December and sent a letter to Secretary Shalala that the council was unable to reach agreement.”

Donna Shalala, the Health and Human Services secretary, appointed the Advisory Council on Social Security in June 1994 to find ways to keep the system solvent over the long term.

The amount of money the government collects for Social Security this year will exceed by $60 billion the amount it must pay in benefits. But starting in 2012, as the baby boomers start retiring, the fund will pay out far more than its proceeds each year.

Without corrective action, it will be broke by 2029. At that point, payroll taxes will cover only 76 percent of promised benefits.

Disagreements within the 13-member panel left it divided into three factions.

A five-member segment, including Schieber, wants to replace Social Security with a two-tier system of “personal security accounts.” Retirement benefits would vary, depending on the success of each worker’s investments.

A six-member faction led by former Social Security commissioner Robert Ball supports keeping the current system but diverting into stocks 40 percent of Social Security tax collections from 2000-2015. Because the stock market has historically provided higher returns than bonds, supporters argue that would end the trust fund’s cash crunch.

Two other members, including panel chairman Edward M. Gramlich, want to establish mandatory individual savings accounts. The accounts would be owned by workers, managed by the government.

“There have been really since the beginning of the council strong disagreements about the overall direction in which Social Security should go,” Gramlich said. “I think no amount of talking would get rid of those disagreements.”

Dissension in the first year was minor compared to the panel’s later divisions. Until August 1995 the group seemed ready for a unanimous recommendation to keep the current system, Shea said, but with part of the fund invested in the stock market. Discussion had centered on the logistics of investing $800 billion.

Then, in late summer 1995, some of the members started questioning a plan that could make the federal government the biggest investor in the U.S. stock market with about 10 percent of total shares. Although the council’s last officially planned meeting was in December 1995, members continued to meet for an extra year to forge proposals.

Schieber explained the panel’s delay of 18 months in even starting to discuss alternatives as a function of how ingrained the current six-decade-old Social Security System has become in American lives.