Despite Concerns, Presidential Candidates Are Quiet about Social Security

WASHINGTON — Two years after President Bush unsuccessfully pushed Social Security reform as his top domestic priority, presidential candidates are again talking about the issue.

But not very much.

With the exception of a news conference dedicated to the issue by Republican Fred Thompson and occasional debate flare-ups between Democrats Hillary Clinton and Barack Obama, the candidates have largely avoided speaking in public about Social Security.

Nor is it getting big play on their Web sites. The only candidate whose Web site lists Social Security as one of his major issues is Rep. Ron Paul, R-Texas, although all of the Democrats except Clinton, a senator from New York, include it under their main issues of elderly or retirement security.

But whether they highlight it or not, all of the candidates agree something must be done about Social Security.

The latest predictions by the federal government indicate that beginning in 2017, the income brought in by payroll taxes will fall short of the Social Security benefits paid, but the program's trust fund will have enough to fully pay benefits until 2041. At that point, Social Security won't have enough money from payroll taxes and the trust fund to pay full benefits.

The candidates divide along party lines in their approach to the problem.

All Republican candidates say they support augmenting — and in some cases even replacing — Social Security with some form of personal investment account, the cornerstone of Bush's plan two years ago.

The Democrats are a little more divided. Most support some form of an increase in the cap on income that is subject to the payroll tax, although two — New Mexico Gov. Bill Richardson and Clinton — question doing that.

The 12.4 percent payroll tax (6.2 percent paid by workers and 6.2 percent by employers) is levied on the first $97,500 in wages. That cap is scheduled to rise to $102,000 next year.

There are three major proposals for raising the payroll cap:

— Impose the payroll tax on all wages without a limit.

— Impose the tax on wages up to a limit of about $170,000.

— Employ a "doughnut hole" approach whereby income up to the current limit would be taxed, then income above that threshold would be exempted until a new threshold, such as $200,000, is reached, when the payroll tax would again apply.

Among the Democrats, former North Carolina Sen. John Edwards has been the chief proponent of the doughnut hole approach.

Obama, a senator from Illinois, has supported raising the cap on wages, but he has also said he would support a doughnut hole.

Sens. Joseph Biden of Delaware and Chris Dodd of Connecticut and Ohio Rep. Dennis Kucinich also have endorsed raising the cap, although Dodd said he would limit the increase.

Richardson is the only Democratic candidate to explicitly oppose raising the cap. He argues it would hurt small businesses that would share in the higher taxes.

Clinton has also expressed concern about raising the cap, but hasn't said that she's opposed. She did argue with Obama last month about whether raising the cap beyond $100,000 would hurt the middle class. In a CNN-sponsored debate, Obama argued that because only about 6 percent of Americans earn more than $97,000, raising the cap would affect the upper class, not the middle class. Clinton said that it would affect firefighters and school superintendents.

On the Republican side, Thompson, a former senator from Tennessee, is the only candidate who has offered a detailed proposal to restructure Social Security.

All GOP candidates say they would support personal investment accounts. Colorado Rep. Tom Tancredo even wants such accounts to replace the current system for young workers.

Thompson's plan would keep the existing payroll tax, plus require each worker to pay 2 percent of his wages into a "voluntary" personal retirement account. It's called voluntary because workers would have the opportunity to opt out of the program at the beginning of each year.

Under the program, the federal government would match part of the worker contributions and invest the money in stocks, bonds and mutual funds, like 401(k) plans do.

Thompson also has called for changing the way initial Social Security benefits are calculated.

Initial benefits are based on a person's wages to replace a certain percentage of income. After the initial benefit level is set, it increases each year through a cost-of-living adjustment based on prices.

Under Thompson's plan, initial benefits would be based on the price index so that the relative purchasing power of a person retiring now and in the future would remain the same.

Groups such as AARP and the National Committee to Preserve Social Security and Medicare oppose Thompson's approach because it would mean a cut in future payments to retirees. According to the nonpartisan Congressional Research Service, "price-indexing would make small annual reductions in initial benefits, but the cumulative reduction would be substantial when compounded over many years. This could have serious implications for the retirement income of low-wage workers."

Former Arkansas Gov. Mike Huckabee has proposed scrapping the federal income tax and payroll tax and replacing them with a national sales tax.

Like Tancredo, Paul has proposed allowing young workers to drop out of the Social Security program, but he also would eliminate all taxes on Social Security benefits.

Interested parties on either side of the issue are critical of the political debate.

"This is a very real situation, and it is something that really needs to be discussed in the campaign — not just ignored — and so far they have done a pretty marvelous job of ignoring it," said David John, a Social Security analyst for the Heritage Foundation, a conservative think tank.

On the other side, Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare, said he was concerned Social Security is getting the wrong kind of attention because of Obama's comments that it is facing a "crisis." He compared that with President Bush's use of the word in what Richtman called an attempt to stampede the country into changing the nature of Social Security. Obama, however, has recently backed away from those statements.

Richtman's group, as well as AARP, the nation's largest organization for those 50 and older, support raising the cap on taxable income, especially if the threshold is based on historic tax-to-wage ratios. The historic rate is about 90 percent of the nation's wages, which would increase it to about $170,000, said David Certner, director of federal affairs for AARP. Both groups would support more benefits to go along with the higher payroll cap.

But John said lifting the cap would prolong the program's solvency only by about seven years. One reason is that once people's income reaches a certain level, their compensation is not given in the form of wages subject to the payroll tax.

"It's not like Donald Trump is going to pay FICA taxes on all of his income," John said, referring to the payroll withholding tax.

He praised Thompson for having the only detailed plan and called it "somewhat reasonable," although he said he wasn't sure whether it would work because of a component that would rely on general revenue to cover benefits for those currently in the Social Security program.

John said he is surprised that Clinton has not put forward a plan other than to say what she opposes.

"She won't touch benefits, she won't raise taxes and she won't have personal savings accounts. What you are left with is wishful thinking," John said, noting that the Social Security trustees have estimated there is only a 2.5 percent chance that the system's financial problems will be resolved solely through a more robust economy.

Obama similarly says Clinton has failed to show leadership by not taking a position on the payroll tax question, but he has also said he would support the one Social Security proposal that Clinton has made. That is her plan to appoint a task force to study Social Security and come up with solutions.