Gramlich addresses social security reform

By Jeremy W. Peters

Daily Staff Reporter

One of the more contentious issues in the 2000 presidential campaign will undoubtedly be how the next chief executive will reform the Social Security system.

With the Social Security trust fund currently predicted to run out by the year 2035, no politician will argue that measures must be taken if the system is to be extended to the nations future retirees.

"In Washington, it's known as the 'third rail.' Politically, you touch it and you die," said Federal Reserve Board of Governors member and former School of Public Policy Dean Edward Gramlich, who spoke at the University yesterday.

Where lawmakers differ, and Bush and Gore have butted heads, however, is on the issue of how much money the federal government should dedicate to Social Security.

With more than 15 years of government experience behind him, Gramlich offered his ideas on how Congress and the next president can ensure Social Security is safe for the 21st Century.

"The standard 20th Century response would be to raise payroll taxes," Gramlich said, adding that this would solve the problem for the present time.

"The problem with that," he said, "is nobody wants to do it. Whether Republican or Democrat, that's the last thing they want to hear about."

Over the course of the primary races, Texas Gov. George W. Bush and Vice President Al Gore have been exchanging blows over whose Social Security plan is more fiscally responsible.

Gore has said that Bush's plan for the projected budget surplus cuts too much, would benefit the wealthy and would dip into the Social Security trust fund. Gore has said he would invest the entire Social Security surplus of $150 billion each year back into Social Security.

Bush has defended his plan by saying that if he does not return the majority of the surplus to the people, it will be spent by Congress. Bush has also said he favors individual savings accounts as a supplement to Social Security.

Gramlich said after his lecture that Gore's plan of taking the Social Security surplus and putting it directly into the trust fund is more complex than it seems.

"There's a difficulty in transferring funds," he said.

The Federal Reserve governor said he does not endorse either candidate's Social Security plan.

Social Security Advisory Board member Lori Hansen Riegle, who also participated in yesterday's lecture, said she favors Gore's plan which she deemed "essentially Clinton's plan."

"Bush would rely heavily on individual accounts and it's not clear if he would use the financial resources of Social Security to pay for Social Security," Riegle said.

Where politicians have also conflicted recently is whether to fund Social Security with revenue from outside the trust fund.

Gramlich said he thinks that funding Social Security with general revenue generated from cutbacks would be beneficial. On the other hand, he said, if this general revenue came from international loans, it would not be a good idea.

Still, Gramlich contended that no solution will ever accomplish the mammoth task of completely reforming the system.

"In Social Security, nothing is a slam dunk," he said.

JESSICA JOHNSON/Daily

Federal Reserve Board of Governors member and former School of Public Policy Dean Edward Gramlich speaks yesterday on Social Security reform.