WASHINGTON – Al Hubbard has learned three things during his first month on the job at 1600 Pennsylvania Ave. NW: how to find the nearest bathroom,never to refer to the president as “George” and,third,“There's no money in the Social Security bank. … It is getting worse every day,every year.”
A former classmate of Bush's at Harvard Business School,Hubbard became assistant to the president for economic policy and head of the White House National Economic Council in January. “I actually only started four weeks ago,so it's been a crash course in Social Security,” said Hubbard,57,a former Indiana businessman.
As Social Security becomes a focal point of President George W. Bush's second term,White House advisers like Hubbard are playing a key role in helping the president make his pitch to restructure the nation's 70-year-old social insurance program.
Hubbard addressed criticism of the president's plan,which would allow young workers for the first time to invest some of their payroll taxes in the stock market,as he spoke Tuesday at the Cato Institute,a libertarian think tank.
Hubbard said Social Security is operating with annual surpluses that will disappear over the next 13 years. As baby boomers retire,the number of retirees drawing benefits will far outnumber workers paying into the system.
“From the beginning,Social Security was created as a pay-as-you-go system. … It's never been a bank account,” Hubbard said,estimating a $300 billion deficit in 2032.
Hubbard said the president is committed to finding a permanent solution for the program,which could include raising taxes,cutting benefits or massive borrowing. The president has rejected raising payroll taxes.
“He also believes there's no comprehensive,permanent change without personal accounts,” Hubbard said.
Bush outlined his proposal during the State of the Union speech last week. The plan would allow workers born in 1950 and later to put up to 4 percent of their income subject to Social Security taxation into stock,bond and mixed investment funds beginning in 2009.
Addressing criticisms of Bush's proposal,Hubbard said workers would not be able to draw from the personal accounts before their retirement or borrow against their balances.
“It's a nest egg for retirement,and if you die,unfortunately,it would go to your estate and be passed down,” Hubbard said.
The accounts would not be subject to hidden fees from Wall Street,Hubbard said. “The president is not going to let people participate in risky personal accounts,” he said.
Hubbard said personal accounts would only be part of the president's plan to fix Social Security.
“He's looking forward to working with Congress. The president has made it clear he's looking for ideas,” Hubbard said.
Social Security was an issue the president did not have to tackle in his second term,Hubbard said. “He could have chosen not to deal with Social Security. It's one of those hidden costs that just keeps getting bigger and bigger,” Hubbard said. “He's willing to take the heat.”
Michael Tanner,a Social Security expert with the Cato Institute,said the Washington think tank has been lobbying for private accounts for 25 years.
“We're glad to see the administration on the same page,” Tanner said. “We'd like to see them go further. We'd like to see them come out with larger private accounts.”
Tanner said Hubbard clearly outlined the need to reform Social Security. “Change is always scary. … I think it's important to speak to people in very simple and concrete terms,and I think he did,” said Tanner,predicting lengthy debates over the plan during the next few months.
“The president is just beginning to go out and sell his message,” Tanner said. “But this is a president who has never lost a vote he went out to win. I wouldn't bet against him.”