The White House is continuing to push for legislation which would create private accounts funded by payroll taxes, even though Democrats remain almost unanimously opposed and some top congressional Republicans want to scale back such plans. Some House Republicans support Ways and Means Chairman Bill Thomas' (R-CA) proposal, which creates these accounts and while also claiming to move the program towards solvency. Yet although he has the support of some, many House members on both sides of the aisle continue to remain skepitcal about moving a solvency bill loaded with benefit cuts.

As this Economic Snapshot from the Economic Policy Institute illustrates, the plan to create private accounts out of the Social Security surplus is less sound than it appears. As EPI says, "Proponents tout this plan as a way to 'stop the raid' on Social Security, but, like other privatization proposals, it diverts money from the trust fund and relies on infusions of general revenues to avoid worsening the trust fund balance."

The Social Security surplus next year is projected to be around $85 billion. EPI estimates, "credits in the accounts would start at 2.2% of payroll in 2006 and shrink thereafter, dropping below 2% by 2009, below 1% in 2014, and to zero in 2017. Over 11 years, the typical worker would probably accumulate about three to five thousand dollars in such an account and face a comparable debt to the government."

Along with work happening in the House, the Senate Finance Committee also plans to move ahead with work to draft a Social Security bill. The Finance Committee staff plans to meet next week during the July 4 recess with the goal of having a draft ready to present to senators when they return. The focus during staff sessions leading up to this work has been mainly on how to work payroll tax funded "carve-out" accounts into a solvency bill. Apparently, tax increases are off the table, and Senate Finance Committee Chairman Grassley is continuing to push for larger carve-out accounts than proposed last week by Sen. Jim DeMint, (R-SC), sources said.

It is not clear yet if the legislation will end up including carve-out accounts or "add on" accounts that are funded outside the Social Security system. Apparently, Grassley will insist on legislation that includes accounts as well as provisions for making the system solvent, even if the House does only a limited DeMint-style proposal without addressing solvency.