Sen. Daniel Patrick Moynihan of New York certainly hit a sensitive nerve a few months ago when he suggested cutting Social Security payroll taxes.
Immediately, the suggestion encountered so much resistance in Washington that there was never any doubt about its fate: Any such cut is going nowhere fast.If there was ever any doubt on that score, it should have been eliminated with the release this week of the latest Gallup Poll. It shows 57 percent of the public is opposed to cutting the Social Security payroll tax the way Moynihan suggested, while 69 percent are against such a cut if it means other taxes would have to be raised later.
Even so, Moynihan's proposal has served a useful purpose because it raised public awareness about the fiction of the Social Security "trust fund." The fund supposedly guarantees the program's solvency well into the next century. In fact, the trust fund is being spent now, to cover the federal government's operating expenses. The idea that politicians could sit on a mountain of money without spending it was bogus from the start.
The growing awareness of Social Security's shaky long-term financing has likewise renewed interest in a plan by Rep. John Porter of Illinois. Like the Moynihan suggestion, Porter's proposal faces plenty of opposition but also is instructive to contemplate. Even President Bush, who summarily rejected the Moynihan tax cut, says the Porter plan is worth considering.
Porter is against the payroll tax cut because the revenue eventually would be needed to cover the baby boom's retirement. But neither does he want Washington to spend it in the interim. Thus he proposes shifting the money out of the trust fund over a period of 50 years, into individual government-sponsored retirement accounts.
Bonded trustees would then put the money in conservative investments, such as the highest-rated corporate bonds, long-term deposits or government bonds, for a real annual return of about 3.5 percent. (The trust fund currently yields 2 percent.) Each account holder - that is, every taxpayer - would be prevented from withdrawing funds until retirement, after which he would be issued a retirement annuity from his account.
This approach could solve several problems. Americans' savings rate likely would increase, payroll tax increases could be avoided, present and future benefits would be guaranteed and Congress couldn't lay a finger on the money.
That last point should be particularly telling. Any members of Congress tempted to snub Porter's plan the way they have Moynihan's should consider another part of the latest Gallup Poll on Social Security. Eighty-one percent of the public feels it inappropriate that part of the Social Security trust funds are loaned to the government to pay for other programs.
The message should be unmistakably clear: Stop playing games with the Social Security trust fund. It's economically risky to indulge in such tinkering - and those who do so could be risking their own political future, too.