Battle Brews on Social Security

Defenders of the Social Security system are fighting back.

They are firing off reports that deem the national pension system viable with minor changes, and attacking the claims of those keen on privatization.

For instance, the Twentieth Century Fund has just released a brief on the "10 Myths of Social Security." Myth No. 1 is that the system will go broke in 2032.

The Social Security Administration projects that payroll taxes will still cover 75 percent of benefits due that year, if the economy grows only 1.6 percent a year after inflation, far below the average of past decades.

At a faster pace, 2.5 percent, the Social Security Trust Fund would generate an enormous surplus through the next century, says Greg Anrig Jr., a vice president of New York-based Twentieth Century.

Keeping the system financially sound is "a manageable problem," Mr. Anrig says.

That's not what many people believe. Wall Street has poured millions into pro-privatization groups that belittle the present system - and public opinion has followed.

A CNN-Time Magazine poll in April found most Americans under 50 figure the system will go bankrupt before they retire.

Yet Americans of all ages solidly oppose fundamental changes in the program, such as reducing benefits, raising the retirement age, or hiking taxes to back it.

A Congressional Research Service report released Thursday is relevant to those concerns. Rep. Charles Rangel (D) of New York, who requested the study, says it indicates that "vast cuts in benefits are inescapable" under privatization plans.

A tiny nonprofit group in Washington, the Institute for America's Future (IAF), charges that the latest privatization plan, that of the National Commission on Retirement Policy, would reduce benefits by one-third to make room for a privatized plan. It also cites a finding by Social Security actuaries that the 2 percent of payroll diverted to private accounts would offer a slimmer rate of return than the present Social Security system.

That calculation, notes the IAF's Thomas Matzzie, takes account of the fact that Social Security not only provides a pension for retirees. It gives benefits to those who are disabled or widowed. This is often ignored in privatizer calculations.

A new study by the Economic Policy Institute (EPI) hints that when the baby boomers are retired, their children will be able to afford to look after them. The group predicts after-tax income will be more than 30 percent higher in 2030 for an average family.

Mostly, backers of Social Security prize it for its social insurance. It has cut elderly poverty from 35 percent in 1959 to just more than 10 percent today. A privatized system wouldn't do that, they say.

To help defend the system, the IAF has put together a "Social Security Information Project."

Sometime this summer the group may become a formal coalition, says Matzzie, who is coordinating the project.

It could include the AFL-CIO (the nation's trade union federation), a few think tanks, and as many as 100 groups representing senior citizens, the disabled, women, people of color, and even youths.

Young people would be hit most by a switch to a privatized system, says Mr. Matzzie.

In a transition period, they would pay for the Social Security benefits of those retired, and set aside their own retirement investments at the same time.

In Congress, some Democrats are starting to organize to protect Social Security. Two possible presidential candidates, Rep. Richard Gephardt of Missouri, and Sen. Paul Wellstone of Minnesota, strongly support Social Security. That means Vice President Al Gore must be on guard when President Clinton takes a position on reform of the system, perhaps next January.