Moving Forward On Social Security Reform

JANUARY 2005
- Questions Posed As GOP Majority Increases - No sooner had the 2004 Election ended than did the phones in the
Association's Beacon Hill office begin to ring. Instead of calling to
inquire about the election itself, members wanted to know what the
reelection of President George W. Bush, combined with a Republican
dominated Congress, would mean for Social Security reform.

As
Association officers began to analyze the election results, President
Bush himself answered members' curiosity on Social Security reform,
saying it is a priority in his second term. Given that Bush now has a
comfortable Republican majority in both the Senate and House, it is
likely that he will attempt to advance a Social Security bill in 2005.

The
President has begun to outline the very basics of what his
administration may propose as his "signature" Social Security reform
measure. What is known at this time is that Bush would like to
"privatize" a portion of the program, whereby workers will be allowed
to invest some of their Social Security withholdings into so-called
private accounts.

Critics argue that
this approach is dangerous to the long-term stability of Social
Security. Allowing younger workers to divert up to 4% of their Social
Security contributions into a private account could take some $2
trillion away from the program over the long term, just as 77 million
baby boomers will be retiring. Another potential danger is that they
are subject to market fluctuations.

Bush,
along with his conservative allies in the Congress, cite the need to
create an "ownership society", whereby individuals are given more
choices and greater responsibility in planning for their future
retirements. This concept is popular with younger workers, who are
fearful of Social Security's future stability.

Florida Remains Key

While
our Massachusetts Senators and Congressmen continue to lead the fight
for a repeal of the GPO and WEP, their ability to set the terms of the
debate is hindered by the fact that each is a member of the minority
party in Washington. Despite the opposition they have faced from the
Republican leadership, each continues to be an effective voice for
public retirees.

Over the objections
of congressional Democrats, the Republican leadership is expected to
advance a Social Security bill in the coming months. If this prediction
holds true, the Association will once again call upon our Florida
members to play a key role in shaping the debate.

E.
Clay Shaw, the Republican congressman who chairs the Social Security
Subcommittee, easily won reelection (63-35%) in his South Florida
district. Shaw, who lives in Ft. Lauderdale, represents parts of
Broward and Palm Beach counties.

Regardless
of the Association's misgivings about the President's proposal, the
coming year may offer our best opportunity to repeal or reform the
GPO/WEP laws. Congressional leaders, within both parties, are reluctant
to take up bills affecting major policy areas, unless it is part of a
larger restructuring or reform effort.

Dangerous Times

One
area of great concern to Massachusetts officials is the potential risk
of a provision that mandates Social Security coverage upon non-Social
Security states. As members know, the Commonwealth is one of seven
states in which public employees do not participate in the federal
retirement program. Being forced into Social Security would cost the
state and local governments close to a billion dollars a year,
devastating our Massachusetts pension systems.

"These
are dangerous times that we are about to encounter. Somehow we have to
avoid being mandated to join Social Security, while at the same time
reforming the GPO and WEP situation," said Association President Ralph
White. "In some ways, we may have to tiptoe through the graveyard here.

"As
important as it is for us to make a move to include language on the GPO
and WEP in any Social Security bill that Congress acts on, we have to
remain mindful of the overall impact of the Bush plan on the system.
Many of us in the retirement community have serious concerns about
privatization and worry about how such a system would work in the long
run."

Association lobbyists will
continue to closely monitor developments in Washington and will
continue to work closely with our Massachusetts congressional
delegation. Above all else, repeal of the egregious Windfall and Offset
laws, which are devastating to so many of our members, will always be
our top priority at the federal level.

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