Santorum touts Social Security reform in face of storm

With 10 stops on his swing through Pennsylvania this week, Sen. Rick Santorum hopes to sell… With 10 stops on his swing through Pennsylvania this week, Sen. Rick Santorum hopes to sell constituents on the merits of Social Security reform.

But while his route travels west to east, it may be uphill as well.

Santorum, R-Pa., brought President George W. Bush’s proposal to reform Social Security to Duquesne University on Monday, as he presented a strongly divided audience with a yet-unfinished plan for private retirement accounts.

Depicting a “perfect storm” of declining fertility rates, increasing life expectancy and the mass retirement of baby boomers, Santorum said that, beginning in 2018, payroll tax revenues would no longer absorb the costs of paying out Social Security benefits for retirees.

Santorum, who has become something of a Republican spokesman on Social Security reform, said Social Security would produce deficits that could not be alleviated by relying upon a “trust fund.”

“I want you to think of government in terms of cash flows, not in terms of trust funds,” Santorum told the audience. “That’s how government works.”

The event, held in a packed room in the university’s student union, initially had the markings of a more sedate affair: Santorum, with pointer, flipped through PowerPoint slides and gave audience members a primer on Social Security’s forecasted future insolvency.

But when Santorum showed a graph of federal spending and referred to Iraq expenditures as a one-time expense, some attendees protested audibly, prompting Santorum to respond, “I forgot I was on a college campus.”

Tensions within the room heightened further when Santorum, in his presentation, prescribed private accounts as a means of bridging projected deficits.

“If we don’t do anything now, taxes will have to be raised, or benefits will have to be cut, or some combination of both,” Santorum said.

Currently, payroll taxes are at 12.4 percent, half of which is paid by employers and half of which is paid by employees. The payroll tax applies only to a worker’s first $90,000 of income.

Santorum has not ruled out changing the payroll tax structure as a part of bipartisan compromise, but he maintained that fundamental changes in the way benefits are paid out would have to occur.

“Everyone talks about Social Security being a great system,” Santorum said. “Well, it’s a great system, but it’s taken 45 tax hikes to keep it going.”

In a question-and-answer session following Santorum’s presentation, audience members grilled him on the potential risks of a plan that would put retirement funds into financial markets.

“Yes, there’s risk associated with this,” Santorum said. “But not nearly as much risk as certain benefit cuts and a raised retirement age.”

He mentioned a potential option for private account contributions called a “life-cycle fund,” which would automatically vary investments according to a contributor’s age. With such a fund, a younger person would assume more risk, while a person closer to retirement age would assume less risk.

While the cost of establishing private accounts could exceed $2 trillion, Santorum suggested that “a whole laundry list of options” exists to pay for a new system. He only ruled out changing the benefits structure of workers born before 1950.

One young man contended that Santorum’s presentation avoided alternative estimates for Social Security’s solvency, which brought a mix of applause and boos, as well as an appeal for order from moderator George Miles.

Others stepped up to the microphone to express support for Santorum, including a steelworker who lost money in company pension plans and cautioned that a “pay-as-you-go” system could quickly dissolve.

“Ownership matters,” Santorum said. “When it’s your personal account, it matters.”

In remarks to reporters after his presentation, Santorum said he was not surprised to encounter attacks from what he described as “the Howard Dean element of the campus Democrats,” but he expressed overall satisfaction with the event.