Bush administration's plan for establishing personal accounts is "not feasible," says Francis Cavanaugh.
The first chief administrator of the federal Thrift Savings Plan said Thursday that President Bush's plan for establishing personal accounts as part of a Social Security overhaul faces "overwhelming" practical challenges.
"The administration's plan for universal [individual accounts] is not feasible and it should not survive the process of responsible congressional hearings," Francis Cavanaugh, who served as executive director of the Federal Retirement Thrift Investment Board from 1986 to 1994, told the House Financial Services Monetary Policy Subcommittee.
Cavanaugh said there are "considerable dissimilarities" between the Bush administration's plan and the Thrift Savings Plan, which is often cited as a model for the proposed Social Security investment accounts.
While only the federal government administers the TSP, Cavanaugh said the Social Security individual account proposal would create administrative burdens for many types of companies, especially small businesses.
"Since most businesses have fewer than 10 employees, they do not have the experience or administrative resources to support the new plan," Cavanaugh said. He also noted the TSP is "balanced to the penny every day," while the Social Security system is never balanced.
Cavanaugh argued diversifying Social Security trust fund investments would be less disruptive to financial markets and yield higher returns than the current system or Bush's plan. He said a trust-fund alternative also would involve less government influence over private companies and save tens of billions of dollars a year in administrative costs.
Financial Services Monetary Policy Subcommittee Chairwoman Deborah Pryce, R-Ohio, said the TSP is a "great start for any discussion on saving Social Security."