Accounts Could Replace Soc. Sec. Checks



WASHINGTON - Future high-wage earners could see their traditional Social Security checks replaced by the proceeds of the personal investment accounts proposed by President Bush, according to a report by the nonpartisan research agency used by Congress.





The traditional check would disappear as the result of two factors: the cut in benefits the president has proposed for all people who open private accounts, and by linking the growth of future Social Security checks to prices instead of wages, an option the president has said he would consider.

Both trends would have the effect of eliminating the Social Security check for a hypothetical group: someone born next year who goes on to a career as what Social Security considers a "scaled high earner," which this year is a person with annual average earnings of $56,091.

The analysis was performed by the Congressional Research Service at the request of Rep. Charles B. Rangel (news, bio, voting record), D-N.Y., who has staunchly opposed the president's proposal for private accounts. It was based on an array of assumptions about how Social Security legislation might take shape and eventually effect high-wage earners.

"For these individuals, their entire Social Security income would be comprised solely of their individual account proceeds," said the report.

Other wage groups, as well as people retiring before 2071, when a person born next year would be 65, would still receive some form of traditional benefit check, according to the analysis.

The report comes as Congress returns to Washington briefly after a two-week Easter recess and before an adjournment today for the funeral Pope John Paul II.

The White House continues to push for the investment accounts, which it argues are necessary to cushion the blow of any future benefit cuts, but Democrats remain uncommonly united against the proposal, arguing that Bush is trying to kill off Social Security by siphoning off the tax revenues needed to provide benefit checks.

The office of Rep. Nancy Pelosi (news, bio, voting record) of California, the top Democrat in the House, said the study proves "that advocates of private accounts are inaccurate to argue that the accounts would be a modest addition to Social Security and a carrot to enable passage of modest benefit cuts that preserve Social Security.

"Rather than preserve Social Security, private accounts would actually put us on the road to eliminating Social Security," Pelosi said.

The White House was analyzing the report and did not have an immediate response.

Chief among the assumptions underlying the 13-page report was that workers will be able to save an increasingly large amount of their earnings in the private accounts. To date the basic principles outlined by the president have said workers will be able to contribute up to 4 percent of their wages covered by Social Security to the accounts, although the amount would initially be capped at $1,000.

In addition, the research service assumed that workers would retire at 65, two years earlier than the current retirement age. Early retirement reduces the size of the traditional benefit check.

The report also assumed the use of price indexing when determining the size of traditional benefit checks, instead of the traditional link to wage growth.

"Because of increases in labor productivity, wages are expected to grow at a faster rate than prices in the long run," the report said. "Consequently, `price indexing' would result in slower growth of Social Security benefits relatives to those under current law."

Both assumptions would allow the private accounts to grow while the size of traditional benefit checks diminishes, creating a point in the future where the check is offset by the payout from the account, the report concluded.