The Sky Will Fall In 2016

By Michael Duffy/Washington With Reporting by Douglas Waller/Washington

Blue-ribbon presidential commissions fall into two very different personality groups. Type A commissions are made up of reasonable people who disagree about some complicated problem and then struggle to reach consensus. These folks spend months in tortuous public hearings, draft carefully hedged reports, and often wind up utterly deadlocked. Type B panels avoid that outcome by being rigged from the start--stacked with people who already agree on What Is to Be Done yet still go through the motions of assessing the problem. Their final reports are clear and sweeping but usually dead on arrival, because all the opponents who were cut out of the deal are waiting with their knives sharpened.

George W. Bush's Commission to Strengthen Social Security, which diagnosed the retirement system's ailments in an interim report in late July, has the makings of a classic Type B panel. It was created by the White House to produce a specific result--Executive Order No. 13210 requires its final report to propose creation of voluntary individual-investment accounts to augment the program. Chaired by former New York Senator Daniel Patrick Moynihan and Richard Parsons, co-chief operating officer of AOL Time Warner (the parent company of TIME), the panel is loaded with members and staff sympathetic, if not enthusiastic, about privatizing part of the Social Security system.

In its report, the commission claims that Social Security will be in a "cash deficit" by 2016, because benefit checks paid out of the Social Security trust fund will start to exceed taxes collected from workers. Unless the program is changed, the report warns, the public can look forward to "either painful tax increases, significant benefit cuts or astronomical levels of borrowing."

That warning may not be wrong, but it's not the whole story. Since the last big commission met in 1983 (and if you're keeping score, that one was Type A--it deadlocked completely), Social Security has been collecting higher payroll taxes from workers to build up the trust fund in preparation for the baby boom's retirement, which starts in 2008. Year after year, the trust fund lent that extra money to the Treasury's general kitty to pay for things like the Marine Corps, national parks and all those deficits during the 1980s and '90s. So it's fair to say--and the commission says it over and over--that a lot of that trust-fund money has been spent.

But in return for that money, the Treasury gave the trust fund U.S. bonds--a wad of IOUs--and it's unfair to imply, as the commission does, that they have the value of, say, Confederate dollars. What the commissioners left out is that no one believes Uncle Sam will have trouble raising money to repay the bonds. Though the system will inevitably run aground without reform, most experts believe the Treasury will have ample surplus cash to fund retirees at least until 2025 and perhaps as late as 2038. "If someone implies that in 2016 we have to raise taxes, cut spending or borrow more, they aren't telling the truth," says Brookings Institution fellow Gene Sperling, who was a top Clinton economic-policy aide.

Lurking behind the accounting battle is an even hotter argument about whether private investment accounts are an idea whose time has come. Bush believes the best way to ensure that boomers have enough money for retirement is to allow them to divert about a sixth of their payroll taxes into the financial markets in search of higher returns. Most Democrats say such a roll of the dice could create a new generation of aged poor--and the Dow and NASDAQ have recently been acting like Democratic allies. So the party dug in its heels last week, as Senate majority leader Tom Daschle called the report "biased, misleading and flat-out wrong." That brave stand masks a weakness. Party leaders privately admit they can no longer count on their members to automatically oppose Bush on fiscal matters.

The report has some value. It points out imbalances in the benefits system, like the widow who has never worked but gets more than the retired widow who did. And the panel is right to argue that it is far better to tackle the problem now than in 20 years. "There's no question that the do-nothing plan is the most popular," Moynihan told TIME. "About 500 members of Congress support it already. Just keep it up, and it will lead to a disaster."

Sperling agrees that fixes will be needed "down the road." If last week's skirmishing was any guide, that road may be a long one. Bush would like Congress to take up the issue next year, but nobody expects it to. Senator John Breaux, one of the few Democrats who favor partial privatization, told CNN, "It will not happen this year, and I guarantee you it's not going to happen in an election year."

--With reporting by Douglas Waller/Washington