Social Security cuts broached by panel

WASHINGTON -- President Bush's Social Security Commission is considering cuts in benefits for future recipients but has not decided whether to recommend them, the panel's co-chairman said yesterday.

Richard Parsons, a top executive at AOL Time Warner who is co-chairman of the President's Commission to Strengthen Social Security, told reporters that the 16-member body is looking at options on "benefit adjustments."

The effort aims to make Social Security "more certain for future generations," he said.

Parsons and the other co-chairman, former Sen. Daniel Patrick Moynihan, D-N.Y., spoke before the commission's third meeting since Bush created it three months ago.

They both brushed aside questions about the possible impact of sharply lowered federal tax revenue surplus projections on the future of Social Security.

Yesterday, the White House Office of Management and Budget issued new estimates showing that the projected surplus for this fiscal year, which ends Sept. 30, is $158 billion, all but $600 million of which belongs to Social Security.

The revision is $123 billion less than estimated in April.

"We weren't looking at the non-Social Security-related surplus as an option for funding the Social Security system," Parsons said.

Moynihan told reporters, "I wish you wouldn't get too preoccupied with day-to-day events." He added that the creators of Social Security in 1935 "were thinking in terms of 75 years. They did pretty well, didn't they?"

In May, when Bush directed the commission's members to come up with a plan for creating controversial private Social Security investment accounts, he also stipulated that benefits must be preserved for "retirees or near retirees."

But the idea of cutting the future benefits of workers in their prime years did not surface as a key part of the commission's deliberations until yesterday.

Such a recommendation could prove politically dicey for Bush.

Last Monday, the Congressional Research Service, a branch of the Library of Congress, issued a report warning about plans to allow workers to contribute part of their Social Security payroll taxes to personal investment accounts. Such investments could result in benefit cuts between 4.7 percent and 10.8 percent for those retiring in 2020, the report said.

The amounts would vary according to what kind of accounts are set up, rates of return and whether the retirement age is raised, the study said.

Parsons tried to downplay speculation that the commission's ultimate recommendations will require benefit reductions.

"If the question is, 'Have you looked at the impact of benefit adjustments downward?' Yes," he said. "But have we made any conclusions regarding any of that? Not at this point in time."

The commission's final report is due before the end of the year.

Asked later if he thought benefit cuts were a political non-starter, Parsons said the commission was charged with giving Bush "our best judgment in terms of how to fix the system. Whether it's a political non-starter or what the politics are, we're going to let the politicians deal with that."

By 2016 the Social Security system is projected to start paying out more in benefits than it takes in through payroll taxes, and in 2038 the system is projected to not be able to pay full benefits, according to a recent report by the system's trustees.

Those projections have been disputed.

Bush argues that diversion of some Social Security payroll tax money to private accounts invested in stocks or bonds would earn higher returns for workers than the current system can provide.

But opponents in organized labor, women's groups and other organizations insist that the partial privatization, which would involve investment risks, would end up lowering benefits for vulnerable workers who depend on Social Security for the bulk of their retirement income.

In its public meeting, the commission heard reports on how large private-account pension systems work -- including the one covering 2.5 million federal employees.

Earlier, it split into two subgroups for closed-door sessions on fiscal and administrative matters concerning private accounts.

By meeting in two groups, the commission exempted itself from federal law requiring open meetings.

That move evoked harsh reactions from two senior House Democrats, Reps. Robert Matsui and Henry Waxman, both of California.

"The public has the right to know what information is being presented to the commission and how its proposals to privatize Social Security are developed," they said.

Parsons insisted the meetings were merely 'information-gathering" and that "there were no deliberations."

The commission will hold two public hearings on Social Security issues next month -- one in San Diego Sept. 6 and another in Cincinnati Sept. 21.