Senate candidates Reid, Angle squabble over Social Security

U.S. Sen. Harry Reid says he wants to strengthen Social Security, but he also says it's a "myth" that the government insurance program for the old, disabled and survivors is in financial trouble.

Sharron Angle says she wants to keep giving full benefits to seniors and others who have paid into the system, but she also wants to let young workers opt out and open personal retirement accounts.

Yet neither Reid nor Angle has publicly proposed a detailed plan on how to ensure the future funding of Social Security, which has become a focus in their U.S. Senate race.

One reason may be that any specifics to overhaul or tweak the system could involve options voters might not like, from reduced benefits to higher payroll taxes.

"Most politicians run for the hills and refuse to really address this issue, especially when they're running for election," said Ken Fernandez, a political science professor at the University of Nevada, Las Vegas. "Changing the status quo, especially on a popular program like Social Security, is scary."

As a result, the Democratic incumbent and his Republican challenger have traded bitter charges, accusing each other of trying to frighten seniors who rely on Social Security benefits to pay their bills.

The Reid campaign, in two television ads and at least one radio commercial, claims that "Sharron Angle wants to wipe out Social Security."

Angle claims Reid wants to let the system drown in debt, leaving no money to pay out.

Both claims are designed to have the greatest effect on older voters. They tend to turn out in the highest numbers on Election Day because they often have the most at stake.

"This is why they call Social Security the third rail of politics," Fernandez said. "This will probably be one of the top issues in this campaign. It's a gut-level policy issue like abortion or gun control that you don't need to be highly informed about to understand."

Still, the facts about Social Security and its future health are debatable.

Citing government reports, Reid argues that Social Security can pay 100 percent of promised benefits for another few decades. The nonpartisan Congressional Budget Office says the money can last until 2043. The Social Security Administration gives a more conservative estimate of 2036.

"One of the myths around here is Social Security is in deep trouble. Social Security is not in deep trouble," Reid said June 26, speaking on the sidelines of the Nevada Democratic Party Convention in Las Vegas. "If we did nothing with it, it would be OK for the next 40 years. Now we want to make sure it is OK for the next 40 years."

But Reid hasn't offered any specifics on how to ensure Social Security's future funding.

"There can be some tweaks done," Reid said, providing no details. He added in what appeared to be a reference to Angle: "Stop trying to frighten people about Social Security."

Reid campaign spokesman Jon Summers suggested there is no urgency to deal with the matter.

"Social Security faces some long-term challenges but not a crisis that would call for resorting to risky privatization schemes," Summers said in a statement. "And we certainly shouldn't kill, or 'phase out,' this important program. Instead, we can address these challenges through a variety of modest steps that will require good faith, bipartisan negotiations. Those negotiations can be successful only when leaders in both parties agree to strengthen the program, not privatize it or phase it out."

Summers said Reid believes the discussions should be based on three principles:

■ Do no harm. That means avoiding privatization, which would divert some payroll taxes that fund Social Security into personal accounts tied to stock market fluctuations, the Reid campaign argues. The fear is that could reduce funding for Social Security, which could result in cutting benefits.

■ Pay Social Security back. That means restoring the Social Security Trust Fund with cash from any extra payroll tax collections instead of backing it with U.S. Treasury bonds. Critics from both political parties, including Angle, contend these bonds are merely "IOUs" that put Social Security on shaky financial footing, although the United States is unlikely to default on its own bonds.

■ Promote private savings. That means encouraging more people to put their money into 401(k)s and IRAs, which help them save for their own retirements to supplement Social Security.

Also, Summers said Reid believes the government "should not cut any benefits or raise any taxes before doing every­thing possible to crack down on cheaters and close the gap between taxes owed and paid."

Five years ago, Reid successfully led the Democrats in fighting a plan by Republican President George W. Bush to partially privatize Social Security's retirement program for younger workers, which is the sort of thing Angle wants to do.

The Angle campaign didn't return calls and e-mails from the Review-Journal seeking comment for this story. But she has outlined her position on her website and in various interviews.

Angle has proposed paying all promised Social Security benefits to seniors and others who have paid into the system while offering young workers the option to invest in personal accounts instead.

Initially, Angle said her goal was to have the 75-year-old program "transitioned out." But she quickly backed off that notion under heavy criticism and after receiving no Republican support when she visited Washington to introduce herself after the Tea Party favorite won the June 8 GOP primary.

Angle continues to argue strongly, however, that new workers should be allowed to opt out of Social Security and use payroll tax collections for their own retirement investments.

"We need to make sure that those younger employees ... have a retirement account that is secured away from government pillaging, which Harry Reid has," Angle said last Thursday on FOX News. "He has, of course, Social Security, but he also has retirement which is a private, personalized federal plan that says the government can't get in there and take away his retirement."

But Angle hasn't offered any detailed plan for how Social Security could continue paying full benefits if younger workers stop contributing payroll taxes to help fully fund the system.

"The details of that idea will be worked out" after she proposes any plan in Congress, Angle said on May 19 on a KNPR-FM, 88.9 radio program. "There are smarter heads than mine."

Neither the 70-year-old Reid nor the 60-year-old Angle has addressed whether they would raise the retirement age or make other changes to Social Security, although Angle said she would not cut benefits.

Meanwhile, Angle criticizes Reid for not doing something to fix Social Security.

"When Harry Reid calls this problem a 'myth,' he's either being dishonest or he just doesn't get it," Angle said in a statement her campaign released after Reid's convention comments. "Social Security is teetering on the brink of insolvency, and voters in this state deserve more than an out-of-touch politician who has spent nearly three decades in Washington who won't be straight with them."

Angle argues that the Social Security Trust Fund is essentially empty with $2.5 trillion in IOUs, backed by U.S. bonds, as the government uses excess payroll tax collections for other spending.

"We must keep the promise of Social Security by redeeming the 'IOUs' that have been written to the Social Security Trust Fund and then putting that money in a lock box that cannot ever be raided again by Washington politicians," Angle says on her website. "The only way we pay for it is by cutting spending."

Reid, for his part, has argued that any cash generated from Social Security surpluses should be used to reduce the nation's growing, record debt, now more than $13 trillion.

The Congressional Budget Office said last week that the federal debt will represent 62 percent of the nation's economy by the end of this year, the highest percentage since just after World War II. The analysis added that lawmakers will need to trim spending on Social Security and health care to avoid tax hikes or big cuts in other federal programs.

The problem is, in an election year, politicians avoid touching the third rail of Social Security.

Currently, 53 million Americans get Social Security benefits, averaging $1,067 a month. In 75 years, 122 million, or one-fourth of the population, will be drawing benefits, according to a report released in May by the Senate Special Committee on Aging.

The report said Social Security faces a $5.3 trillion shortfall over the next 75 years, unless the government makes some fairly modest changes to payroll taxes and benefits.

Now, Social Security is financed by a 6.2 percent payroll tax on wages below $106,800. The tax is paid by workers and matched by employers.

Older Americans can apply for early retirement benefits, starting at age 62. They qualify for full benefits if they wait until they turn 66, or until age 67 for people born in 1960 or later.

The report gave two options that could erase the entire predicted $5.3 trillion shortfall:

■ Increase payroll taxes by 1.1 percentage points for both workers and employers.

■ Tax all wages, not just those below $106,800.

The report also said that tweaking benefits could reduce any shortfall. According to the report:

■ Reducing the annual cost-of-living increases by 1 percentage point each year could take care of three-fourths of the expected 75-year shortfall.

■ Gradually increasing the age when retirees qualify for full benefits from 67 to 68 would take care of 23 percent of the shortfall. Increasing the age to 70 would wipe out nearly one-third of the shortfall.

Jennifer Keene, a sociologist at UNLV, said she is concerned that with all of the talk about retirement, politicians forget about the millions of other people who count on Social Security. They include the disabled, widows and grandparents raising their grandchildren, she said.

"People seem to focus on the retirement benefits, but there are whole groups of people who don't get talked about," Keene said. "That's who I worry about. You have all this politics, talking about lock boxes and privatization, and people trying to scare seniors, and politicians smearing each other.

"Social Security is a huge safety net that keeps a lot of people out of poverty," Keene added, saying that comprehensive reform is needed. "This was supposed to be a safety net for old people, but nobody expected people were going to be living on Social Security for 30 years."

In truth, from the time President Franklin Roosevelt signed Social Security into law in 1935, the system has been financially upside down, according to historical records. Payroll tax collections began in 1937, and younger workers paying into the system have long supported the growing number of older workers collecting benefits.

From 1937 until 1940, Social Security paid single, lump-sum payments to people who had contributed to the program but weren't vested in it long enough to qualify for monthly benefits.

Ernest Ackerman, a Cleveland motorman, retired one day after the Social Security program began. He's the earliest reported lump-sum beneficiary. A nickel was withheld from Ackerman's pay for Social Security, and he received a lump-sum payment of 17 cents.

Ida May Fuller of Ludlow, Vt., got the first monthly Social Security payment on Jan. 31, 1940.

Fuller, a legal secretary, paid a total $24.75 into the system over three years before she retired. Her first monthly check was $22.54.

Fuller lived to be 100, dying in January 1975 after collecting a total $22,888.92 in Social Security payments, or more than 900 times what she paid into the system.

Contact Laura Myers at lmyers @reviewjournal.com or 702-387-2919.