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Use Automatic Enrollment On Social Security: Expert


House and Senate Republicans have a new proposal that could help make President Bush's Social Security reform package, including its controversial personal accounts, a reality, one prominent Beltway insider contends.

Martin Feldstein, a professor at Harvard University and former chairman of the Council of Economic Advisers under President Reagan, explained in a recent Wall Street Journal editorial that the plan's "fundamental principal is to supplement traditional pay-as-you-go Social Security with investment-based personal retirement accounts."

Feldstein admitted in the editorial that the voluntary personal accounts within the new reform proposal would not cure Social Security's long-term solvency dilemma - the 75-year-old retirement fund is expected to pay out more in benefits than it receives in contribution by about 2017 - but it would eliminate the need to raise payroll taxes, a consequence many experts think is unavoidable under any plan. Feldstein, however, suggests one twist to the Republicans' latest plan: combine automatic enrollment to the voluntary personal accounts, which like Bush's original reform proposal would invest in a mix of stock, bond and mutual funds.

Here's how the G.O.P.'s plan would work, including Feldstein's automatic enrollment twist. These days, surplus Social Security dollars fund a number of government programs. The new proposal would stop that practice and begin sending the cash into personal retirement accounts. The total surplus available each year would determine the percentage of earnings that would go into each individual's account, Feldstein wrote. Every employee would get his or her own account and funds would go into government bonds until 2008. After that they would then be put into mutual funds, which would be managed by an independent government agency.

The automatic enrollment feature - Feldstein suggests that employers would subtract 3% from an employee's earnings before taxes and send that to the Social Security administration, along with regular Social Security taxes - would supplement the surplus funds.

This latest proposal joins a host of others that have been floated before Congress in the last six months. But late word from Senate Finance Committee Republicans is that nothing will go under consideration before the August recess.

"One hundred percent, flat out, no chance," one unidentified Republican said.

That means the Social Security debate will remain on America's plate until September.

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