Political Economics - Page A4
February 11, 1997 White House Social Security Economics
by Staff Journalists, The Daily Republican Newspaper
WASHINGTON DESK - President Clinton's economic advisers say a plan to put Social Security funds in the stock market must consider the consequences when markets fall.
The Report stressed the possibility of political interference in the markets if the government does the investing. The report said changes could be made later that would allow much political influence on investment policies.
Their report also said that while investing in stocks could boost Social Security's returns and cut its long-term deficit, it could also increase federal borrowing costs. That's because the government might have to pay higher interest to borrow from private investors the money that it now borrows from Social Security's trust funds.
The Council of Economic Advisers wrote that any reform of the 1935 Social Security Program should maintain the gigantic social-insurance program, financed by compulsory payroll taxes paid for by both the employer and the employee.
The plan was designed by Franklin Roosevelt, the author and sponsor, in 1935. He justified the plan on the grounds that it was '... protection against the hazards and vicisstudes of life.'
The plan was an enticement for workers and their employers to go along with a payroll tax scheme that collected billions of dollars from workers and employers. That Social Security tax revenue was supposed to be keept in a secure trust account gaining interest over time.
The Roosevelt political rhetoric called for the plan so that covered workers could later replace earnings lost because of retirement, disability ot death. The tax revenue generated from the Program, predomionantly, taxed the income of lower paid wage earners.
However, the Program was so operated by the Social Security Board that there was a proportionately higher benefit paid to low paid wage earners from the pooled funds acount admimnistered by the Spcial Security Board.
In 1939 the name of the Plan was changed to Old Age, Age And Survivors' Insurance and the scope was broadened to include protection of the family, rather than merely the wage earner. This change now provided monthy income benefits for some children and survivors of 'retired' workers.
Certain other survivors of the worker were also made eligible for cash benefits of covered workers who die before receiving benefits.
In 1946 the Congress abolished the Social Security Board and assigned administration of the Progam to the Health and Human Services Administration. However, the Congress took authority over Social Security tax revenues, to itself.
These momentus events in 1946 marked the beginning of the end of Social Security as the Congress quickly appropriated Social Seccurity Trust Funds for one partisan spending debacle after another. By 1997 the National Debt run up by the Congress has expanded to more than $3.25 Trillion.
Clinton administration economists expressed concern for the solvency that Social Security, Medicare, and Medicaid due to the aging of the population and to rising health-care costs.
Clinton's spending for the three entitlement programs now is better than 9% of the total economy. It is forecast to grow by in the next generation or so to an unsustainable 19% share of the nation's economy, the Peport concluded.
With Medicaid facing a big fiscal problem as more seniors seek long-term care, the White House economics advisors called for government legislationb requiring private nursing-home insurance. Their Report suggested legislation requiring employer-provided benefits and tax incentives for private coverage.
At present, Medicaid pays some of the costs for two out of three nursing-home residents, and private insurance covers only about 3%.