DAILY SUMMARY May 12

[National Dialogue Moderator <moderator>]

Daily Summary May 12, 1999

Moderator's Question -- "New Retirement Accounts"

Bob Rosenblatt asked whether President Clinton's proposed Universal Savings Accounts, to be funded from the budget surpluses, are a good idea. He asked whether they can be a basis for a bi-partisan compromise even if nothing more happens on the Social Security issue, whether they would help national savings, and whether they would make it easier later to trim Social Security benefits because people will have more retirement assets?

Roundtable panelists' responses - "New Retirement Accounts"

The panelists answered this question by referring generally to the "three legged stool" of retirement income security policy - consisting of Social Security, private pensions and individual savings. They noted that individual retirement accounts attempt to bolster the "legs" of private pensions and individual savings; although some suggest that stronger private programs may make it easier to cut Social Security benefits (to keep it solvent) in the future.

• John Rother says AARP supports the proposed retirement accounts as independent measures to support the legs of the stool apart from Social Security. The accounts build on the 401(k) system rather than replacing it and would result in net additions to personal and national savings. Social Security, nevertheless, needs its own measures to strengthen it.

• Sam Beard states that the Universal Savings Accounts are a good start toward opening up savings to all Americans, but they don't address the long-term solvency problems of Social Security. He says that the accounts create a new entitlement (the promise to contribute 11% of budget surpluses and match individual contributions) in an existing unfunded system. He says we need to create a pre-funded sustainable system.

• Ann Combs agrees that the accounts are an attractive way to improve national savings and to help lower-income Americans save for retirement; but she notes that they do nothing to address the problems facing Social Security. She says it will be difficult to justify benefit cuts (to save Social Security) on the grounds that people have greater savings. She also notes that the new entitlements are premised upon budget surpluses which disappear early in the next century. She is also concerned about their impact on the continuing viability of 401(k) plans.

• Gerry Shea said the Universal Savings Accounts proposal recognizes that workers need something in addition to, not instead of, Social Security, and it does it in a way that doesn't jeopardize the integrity and core protections of the system. The proposal offers an opportunity to improve the adequacy of retirement incomes for low- and middle-income Americans and responds to the desire of individual accounts proponents' to establish a nationwide system of personal retirement savings accounts.

Ashley Schannauer