Despite recent stock market declines and corporate accounting scandals the White House continues to back Social Security reform that includes investing a portion of payroll taxes in personal accounts. A recent Washington Post article quotes White House press secretary Ari Fleischer referring to the current system as "dangerous" because it "lets people pay a lifetime of high taxes for a Social Security benefit that under current projections they'll never receive." The Washington Post also notes that, according to Fleischer, President Bush still firmly supports this issue. "Nothing has changed his views about allowing younger workers to have those options."
Similarly, the President's chief economic advisor Larry Lindsey spoke out in favor of personal accounts in an interview with Wolf Blitzer of CNN. Lindsey reaffirmed the administration's commitment to allowing individuals the option of a personal retirement account. Excerpts from the interview follow:
Blitzer: A lot of people think, and they may be incorrect, that one of the casualties of what's happened in the stock market is your proposal, the Bush administration's proposal, to let Social Security recipients invest part of that money in the stock market, in equities. A poll that was released by the Wall Street Journal and NBC News: Do you favor or oppose allowing people to put their Social Security payroll taxes into personal retirement accounts? Favor, 41 percent; opposed, 55 percent. So, has that proposal basically gone away?
Lindsey: Oh, I don't think so. I mean, remember the key here, first of all, it's voluntary. Second of all, unlike the question, it's a portion of your account. Third, this is investing for the long haul. This is what brokers would call dollar cost averaging, or investment advisors would call dollar cost averaging. You don't put all your money in the market, $11,000 and take it out at $8,000. You put a little bit in each year, year after year, and that's how it grows. The last thing I'd point out. The market is lower than it is now. They key is, you know, you buy low and you sell high. And I think, if anything, what has happened in the market, we should think of this as a more attractive option.
Blitzer: So this proposal's definitely still on the table, as far as the Bush administration is concerned, despite the --what some would call the collapse of the markets recently?
Lindsey: Wolf, we have no choice. If we don't do something to strengthen Social Security, to provide a better return in Social Security, we're going to face a 30 percent cut in benefits in a couple decades. That is current law. We have to do something to make sure that doesn't happen and the time to do it is now. And a sensible reform is the way to go.
