President Bush's desire to alter the system through "partial privatization" is one of the signs that change is in the wings of the Social Security stage. This approach will allow recipients to set up personal investment accounts. In an Executive Order issued 2 May 2001, President Bush created a Commission to Strengthen Social Security. He named as commission co-chairs Patrick Moynihan, the recently retired Democratic senator from New York, Commission chair, and AOL Times Warner official Richard Parsons.

Moynihan has already announced that the Commission will consider options that allow workers to invest some portion of their contribution in stock and bonds. "We're not privatizing Social Security any more than we're privatizing the Marine Corps," he said. But Moynihan explained that Bush's proposal to give workers "an ownership component" in Social Security is necessary to help the system solve its long-term money problems.

Will It Work or Won't It?

The press points out that industrialized countries such as Great Britain, Australia and Sweden have already acted to create private accounts as part of their social insurance systems. But Bush's proposal for partial privatization in the United States has drawn criticism from Congressional Democrats, labor unions and a large segment of the press.

According to press accounts, privatization is being embraced by almost all elected Republicans as well as some Democrats. Observers note that Social Security is the most popular government program ever created. If private investments are approved, the change to the system will be radical; in fact, it will completely reshape this retirement program, whose principal feature is that it guarantees fixed levels of benefits.

AARP: Privatization is Risky, With No Guarantees

The American Association for Retired Persons (AARP) has raised a number of questions about the changes proposed for the Social Security system as well, especially the plan to invest some Social Security Trust Funds in the stock market instead of Treasury bills. It's a "risky idea," AARP believes, because that market is, by nature, volatile and unstable. "Fluctuations in the market could hobble the system-and a long bear market could destroy it."

"Making Social Security private is an even riskier idea," AARP believes. "Social Security is our only guaranteed retirement income. There are no guarantees with private investments."

Who Would Win?

The how and why of private investment accounts are also raising troubling questions. The Bush proposal for personal investment accounts, for example, could be a bonanza for the securities industry, since securities firms will likely charge fees for managing these accounts. The public needs to know what those fees would be.

Not surprisingly, Wall Street firms, who share an interest in allowing workers to invest a portion of their Social Security benefits in stocks, have retained lobbying and public relations firms to promote the privatization of Social Security. As the press notes, privatization "will bring the firms billions of dollars in fees and commissions."

Questions Abound

Questions are also being raised by Senate Democrats. Senate Majority Leader Tom Daschle (D-S.D.), for example, is fearful that Republicans are prepared to sacrifice Social Security and Medicare to pay for tax cuts. "The 10-year budget that is now being contemplated actually uses $6 billion of Social Security trust funds in the fifth year," he said. "We're very concerned about the raid on Medicare (and) the raid on Social Security."

Henry Aaron, Social Security expert at the Brookings Institution, opposes privatization. "Until we have a real live proposal that people can look at and evaluate, we won't know what the staying power of the issue will be," he said. Another critic, business and financial journalist Allen Sloan urges "an honest debate about Social Security, America's biggest and most important social program. The White House has said that retirees' benefits will be higher under the Bush proposal than under the current formula. Sloan cautions against "getting caught up in an esoteric debate with dueling spreadsheets about whether government payments or private accounts will produce more money for beneficiaries."

Finally, the press has raised a number of questions about the President's proposal. The Washington Post, for example, has asked:

• How wide is the gap between future revenues and costs?

• How will the creation of new accounts be financed?

The Post raises "serious questions" about the privatization proposal. Its risks have not been "fully aired," says the paper, and the President's newly formed commission had met only once as of 20 June. The tax cut recently passed by Congress simply "compounds the problem."

Stay tuned.