Where Social Security reform doesn't sell

When retirees residing here at The Osborn, an elegant gated community, discuss politics, they rarely all agree. But, as a handful gather on settees to discuss Social Security, retired engineer John Menke jokes, "It seems unbelievable, but we have unanimity on something."

That something is opposition to Texas Gov. George W. Bush's proposal to allow a small part of Social Security to be invested in the stock market.

"People may lose money in the stock market, so I don't think this is a solution at all," says Betty Menke, John's wife.

This summer, as Mr. Bush treads where previous Republicans have scarcely dared on Social Security, he is likely to get an earful from those who follow the program the closest - the nation's retirees.

Once, the move would have been considered political suicide. But this year, it represents a calculated risk amid changing generational politics. While older Americans are solidly against the Bush plan, polls suggest a majority of the broader electorate is open to the idea.

Still, what current retirees think remains especially important, because the election is expected to be close. In fact, many of the retirees live in toss-up states, such as Florida and New Jersey.

"There is no question that Social Security is one of the top four or five issues" in the presidential race, says Robert Blendon, a public-policy expert at the John F. Kennedy School of Government at Harvard University in Cambridge, Mass.

The issue is likely to be a central feature of the presidential debates. Recently Vice President Al Gore let loose with a verbal volley denouncing a Washington Post column in which a Bush adviser praised the stock-investment scheme.

Such clashes are likely to be as common as thunderstorms this summer and fall. Political analysts expect the Democrats to devote a significant portion of their advertising to the issue. "They will absolutely hammer away at it," says Jennifer Duffy of the Cook Report, an independent political journal.

The last time Social Security became an issue was in 1986, after Republicans had voted to freeze cost-of-living adjustments as part of the 1985 budget-cutting process. Retirees remembered the vote when they went to the polls, and the Republicans lost control of the Senate.

It's a lesson that many Republicans still remember. This year, GOP Sens. John Ashcroft of Missouri and Spencer Abraham of Michigan are taking credit for the "lockbox," that is, the concept of guaranteeing that Social Security will be preserved.

And Bush himself is stressing that entrance into his program will be voluntary - with people choosing to put perhaps 1 in 6 of their current Social Security tax dollars into individual accounts that can be invested in stocks or bonds.

Last week, a Republican strategist group, the Luntz Research Cos. sent a fax to Republicans, explaining to them the "right words" to use on Social Security. It warned not to say "private" accounts or "privatize" Social Security. The correct words are "saving" Social Security and "personal savings accounts."

IN the past, politicians avoided making election-year proposals that might affect Social Security. But this year, after a decade of stunning stock market performance, recent polls show about 55 percent of adults favoring the basic concept of the Bush plan. It is a proposal that appeals to younger voters, who have only seen the stock market go up.

"The bulk of the public is not connected to the Great Depression and sort of feel if you take part of the money and invest it, you would get a better return than the government does," says Mr. Blendon.

But many of those who are now on Social Security remember the Great Depression, if not the stock market crash of 1929. A recent Newsweek poll showed a 49-to-29 percent margin of people 65 and older opposed to the idea of investing some Social Security taxes in the stock market. A Gallup poll put opposition at 65 percent among seniors.

Mr. Gore has taken a middle ground on the volatile issue, blasting the Bush plan as risky and vowing not to touch Social Security, but also proposing a $200 billion program in which the government would contribute money to match what individuals sock away in individual investment accounts.

"Generally, the older seniors - those 80 and above - don't want to see anything happen to Social Security," says Rick Cox, president of Senior Benefit Centers of America Inc., a Boca Raton, Fla., information clearinghouse for seniors. "Below that age, a higher percentage is willing to see something happen. They are more free-thinkers, I guess."

At The Osborn, the seniors fall into the former category - those who don't want make any major changes. They don't believe the economy will continue at this high level and the stock market will fall as the economy cools.

"We have been conditioned to think the market is always going up, but I've been in the market long enough to know it doesn't always do that," says Evan Johnson, a retired executive.

If Social Security investments are made in the market, the seniors fear the worst. Mr. Johnson envisions lobbyists trying to get investment-company clients eligible to manage people's Social Security funds. "Can you imagine the pressure on them to put your money here or put your money there?"

The Osborn seniors can also imagine enormous pressure on Congress if stock-market investments falter. "It's going to cost the taxpayers in a bad market, a terrible amount of money," says Mrs. Menke. Both she and her husband are convinced the only way to rescue Social Security is to increase the age of retirement. It's a solution that appeals to current retirees but not to baby boomers. The last time Congress increased the retirement age by two years, it phased the change in over 10 years.

A somewhat younger retiree, Kenneth Simmons in Riegelsville, Pa., sees no reason Social Security recipients shouldn't be allowed to invest some money in the stock market. "When you look at the market from 1929 on, it would be much better to have it all in the stock market."

This is a debate that is only going to intensify through the fall. In that respect, says Ms. Morton, it's healthy for the country. "People are now talking about how do we make sure the next generation has adequate security - how do you encourage people to save more?"

(c) Copyright 2000. The Christian Science Publishing Society