Greenspan: Reforms To Social Security Could Bring More DebtBy Edmund L. Andrews
and Richard W. Stevenson
The New York Times -- WASHINGTON
Alan Greenspan, the Federal Reserve chairman, gave his blessing on Wednesday to the creation of individual investment accounts in Social Security but expressed unease that the change could lead to trillions of dollars in additional government borrowing in the next few decades.
Greenspan’s cautiously hedged support for the core of President Bush’s plan to overhaul the retirement system came as Bush, in newspaper interviews published Wednesday, left the door open to raising taxes on upper income people to help deal with Social Security’s projected financial problems.
In what appeared to be an attempt to show Democrats that he is serious about bipartisan compromise, Bush, responding to questions from a group of regional newspaper reporters, did not rule out raising or eliminating the cap on earnings that are subject to the payroll tax that pays for Social Security benefits.
The tax is currently levied on wages up to $90,000. Until now, Bush has said he is against raising “payroll taxes” but has been vague about whether he was talking about the earnings cap as well as the payroll tax rate of 12.4 percent, which is split equally between workers and their employers.
“The one thing I’m not open-minded about is raising the payroll tax rate,” Bush said in the interview, which took place at the White House on Tuesday. “And all the other issues are on the table, and that’s important for people to know.”
Asked specifically if he was open to raising the earnings cap, he replied, “I’ve been asked this question a lot, and the answer is I’m interested in good ideas.”
Taken together, the developments reflected the continued wariness on all sides about the costs, ideological ramifications and political risks of attempting to reshape Social Security and put it on a sounder financial footing as the American population ages.
Bush has put the issue at the top of his domestic agenda, but has had little success pushing it ahead in Congress, where many members of his own party have qualms and Democrats are spoiling for a fight.
If Bush’s statement was an overture to Democrats, some of whom have suggested that raising the earnings cap is a more attractive alternative than cutting benefits, it got a cold shoulder on Capitol Hill.
Sen. Charles Schumer of New York said his fellow Democrats viewed it as “a bit of a ruse” that would probably end with the White House disavowing any willingness to consider tax increases.
“Democrats are not going to be taken in by smoke signals,” Schumer said. “The president says this is a crisis, so it’s up to him to put a concrete, complete, comprehensive plan on the table.”