Human Needs Report Article

The Human Needs Report is the Coalition on Human Needs' newsletter on national policy issues affecting low-income and vulnerable populations. It is published every other week while Congress is in session.

Privatizers Attempt Trojan Horse Legislation in the House (7/22/05)

On July 15, Representative Jim McCrery (R-LA), Chairman of the Social Security Subcommittee of the Ways and Means Committee, and other House Republicans introduced a bill (H.R. 3304) to create private accounts in Social Security by funding them with surplus payments that are supposed to fund future benefits. Since surplus revenues are only projected for Social Security for 11 years, the accounts could receive no new money after 2016. Since the plan would require deficit financing to make up for the lost revenue, the Center on Budget and Policy Priorities calculates that federal deficits would be increased by $1.7 trillion dollars over the first 20 years.

The McCrery plan and a similar proposal by Senator DeMint (S.1302) are acknowledged by their sponsors really to be a first step in a more extensive effort to privatize Social Security. Senator DeMint has been quoted as saying, "Our whole intention is to come back and add reform on top of this -- at least [my intention] -- is for larger accounts, a permanent solution."

As the DeMint plans does not appear to have good prospects of passing the Senate or, for that matter, even the Senate Finance Committee, pro-privatization Republicans are turning hopeful eyes towards the McCrery legislation in the House. It is expected to be bundled together with pension reform legislation recently passed out of the Education and Workforce Committee and other legislation into a broad "retirement bill" that Ways and Means Chairman Bill Thomas (R-CA) hopes to craft sometime after the August recess. Senator Charles Grassley (R-IA) has met with Republican members of his Finance Committee 15 times to discuss Social Security and still has not been able to find a majority needed to pass legislation out of his committee.

The McCrery-DeMint plan makes no attempt to bring solvency to the Social Security program, which was the stated goal of overhauling Social Security when President Bush began his tour around the country to promote private accounts. It appears that many Republican leaders are moving toward the idea that a proposal without "pain" is needed to establish private accounts and then create some political pressure for future expansions and further privatization. Rep. Thomas had earlier said that solvency would be addressed in the broad bill he's planning to craft in the Ways and Means Committee, but he recently agreed with proponents of the McCrery plan that the legislation did not have to include the "pain" of tax increases or benefit cuts needed to enhance solvency.

Where the White House stands on creating private accounts without addressing solvency is somewhat unclear. White House National Economic Council Director Allan Hubbard seemed at least partly to endorse the strategy of the House Republicans last week when he called the McCrery plan "a very important first step." However, Ben S. Bernanke, the new chairman of Bush's Council of Economic Advisers, told reporters Monday that solvency provisions had to be part of any Social Security legislation to receive White House support.

Pro-privatization members of Congress intend to promote the McCrery-DeMint plans during the August recess. Those fighting to protect Social Security are planning several activities during August to counter the privatization offensive, including a Congressional call-in day on August 1 and events to celebrate the 70th anniversary of Social Security on the weekend of August 13-14.