NEW YORK (Reuters) - Treasury Secretary Lawrence Summers Wednesday advocated setting up "lockboxes" for key retirement and health care plans, and he warned against proposals backed by Republican presidential nominee George W. Bush.
Summers' prepared remarks for delivery to the Conference Board, a business research group, never mentioned Bush by name. But he said a proposal for diverting revenues from the Social Security tax base so that taxpayers could set up individual accounts, favored by Bush, could bankrupt the program.
"Indeed, diverting two percentage points of the payroll tax would reduce available revenues by approximately $1 trillion over the next ten years alone," Summers said.
"This would lead to an excess of benefits over tax revenues by 2005, and the total exhaustion of the trust fund in the early 2020s, or within the life span of those retiring this year," Summers said.
The Democratic presidential nominee, Vice President Al Gore has proposed setting aside Social Security and Medicare funds in "lock boxes," or special accounts that cannot be reallocated. (WebEditor: These funds are currently being used by Summers to pay off wealthy bondholders).
Gore wants to maintain the Social Security system in its current form. Gore favors paying down the national debt as quickly as possible and transferring from general taxes the equivalent of the interest saved to the Social Security trust fund in order to extend its life. (WebEditor: By "paying down" the national debt, these actions will more completely empty the Social Security Trust Fund and the Medicare Trust Fund).
Summers said he wanted to see revenues directed toward Social Security and Medicare made "inviolate" by ensuring that they went into lockboxes that prevented the money being used for any other purposes. (WebEditor: except the pay off by Summers to wealthy bondholders !)
"To be sure, establishing a lockbox significantly constrains our ability to cut taxes or to increase spending," Summers said, adding "That is why it is so important."
In another clear reference to Bush's campaign proposals, which include a broad tax cut, Summers said that measures to boost the economy's supply potential were more vital than any that foster demand, as tax cuts might do.
"Policies that boost demand, without increasing supply potential, run the risk of higher interest rates, higher inflation and greater economic instability," Summers said.
Summers' remarks were his most direct entry so far into the campaigning for the Nov. 7 presidential election, and echoed criticisms made by Gore of some of Bush's economic proposals.
He said the economy's current health stemmed from "the responsible policy of fiscal discipline that we have pursued over the past 7-1/2 years" and cautioned the credibility won in markets could quickly be lost by less disciplined policies.
1. "Debating Detailed Plans for Hypothetical Money".
2. "Social Security Trust Fund Used to Reduce National Debt".