“Federal policies should help to open up new opportunities for seniors, not force them into unnecessary or premature dependence.”
Strengthening Social Security is one of our most important domestic policy priorities. For today's seniors and those nearing retirement, the system is sound and nothing will change—your benefits are safe. However, the long-term financial outlook of Social Security is deteriorating and, without significant reforms, it will impose an unsustainable financial burden on today's younger workers and future generations of retirees.
The white-hot rhetoric surrounding Social Security modernization is creating an environment that punishes those who discuss reform options openly and honestly. The American people deserve a modernized Social Security system that provides true retirement security for all Americans, and does not put unfair pressure on future taxpayers and on other essential services.
This goal will only be achieved if we make a commitment to discuss the need for Social Security reform candidly. Unfortunately, this has not always been in the case. Social Security has often been used as a weapon to achieve short term political goals. Indeed, both parties seemingly compete to outbid each other in ruling out options for restoring the fiscal health of Social Security. It is time for the demagoguery to stop.
I am an original cosponsor of S.1302, the Stop the Raid on Social Security Act of 2005, because it ensures that revenues collected for Social Security are always available for Social Security benefits. The bill creates a genuine "lockbox" by walling off surplus Social Security revenues in personal retirement accounts legally owned by workers themselves. While this is not a comprehensive solution to the problems facing Social Security right now, it is a decisive step in the right direction.
I continue to support broader personal account reforms and want to see Congress address comprehensive reforms like those outlined by the President and bipartisan experts. S.1302 is a good down payment on that process.
Learn more about this legislation—
The Time is Now
by US Senator Larry Craig
February 3, 2005
In his State of the Union address, Americans heard President George W. Bush lay out a convincing case that Social Security reform is needed. The President spoke boldly and with clarity. That is exactly what we need to tackle this difficult issue. He set out some sound, general principles and invited all interested parties to come to the table and work together...
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$22,000,000,000,000
(thats $22 Trillion...and counting)
Questions have been raised about the "transition costs" of adding a voluntary, personal retirement account option within Social Security. Truth is, adding personal accounts within Social Security for today's younger workers would result in lower costs to future taxpayers, future Social Security beneficiaries, or both.
But, don't just ask me. Ask the experts.
During the last session of Congress, as Chairman of the Senate Special Committee on Aging, I held several hearings on the issues surrounding Social Security reform. Use the links below to access resources from each hearing, including statements made by expert witnesses and the conclusions reported by the Committee.
“I want to emphasize that the topic of this hearing is really about America's youth. Those currently on Social Security and about to retire will not be affected by any reforms discussed here today.”
-US Senator Larry Craig,
Aging Committee Hearing,
Opening Statement, 6/15/04
Two years ago, I asked the nonpartisan Congressional Budget Office to review one of three personal retirement account plans presented to President Bush. The plan CBO reviewed would allow younger workers to set aside four percent of the Social Security taxes they pay (up to $1000) and place that money in a personal retirement account. The interest earned would supplement their traditional Social Security benefits, and when they pass away, the money left over could be given to family or donated to charity.
Those presently retired and those near retirement would not be affected. For them, the current system is sound and will not change. But the evidence shows that future retirees - including those now in their 40s and younger - could benefit substantially.
The CBO's review found that between 2036 through 2050 - a span of just fourteen years - there would be a transfer of funds. But that is money that already will be spent under currently scheduled benefit costs - so again, there is no added cost to Social Security.
Indeed, if we do not change Social Security, the money needed to pay the not-yet-funded promises made by the current system would result in higher costs, leading to higher taxes, greater borrowing, or massive spending cuts in other programs - things no reasonable person wants to impose on our children and grandchildren.
Nonpartisan experts at Social Security indicate that a multi-year transition to personal accounts would require raising $7 trillion above currently-scheduled Social Security taxes. That is a lot of money.
However, as commentator Paul Harvey says, "Here's the rest of the story." Fully financing current Social Security promises would require finding $22 trillion above currently-scheduled taxes. Now, $22 trillion is a lot more money than $7 trillion. In other words, the $7 trillion in transition costs to achieve a mid-sized personal retirement account option would cost taxpayers $15 trillion dollars less than the current Social Security program promises, but cannot afford to pay.
The real issue is: where will the extra $15 trillion come from if we don't move to personal retirement accounts? In short, if we don't invest $7 trillion, we'll end up spending $22 trillion. That difference - $15 trillion - is likely to come from higher taxes on middle-class Idahoans or massive spending cuts in Medicare, Medicaid, highway construction, national forests, national defense, energy research, medical research, etc.—or from real cuts in future Social Security benefits. And yes, the one-time $7 trillion investment will be financed similarly - but the future fiscal challenge would be reduced by about two-thirds. We need to act soon to avoid the growing $22 trillion challenge.
Ask the experts at the Social Security Administration.
Jim Lockhart, Deputy Commissioner of Social Security testified last year that, "Delay may cause the need for more significant tax increases and benefit reductions, as it is doing now for some continental European countries and Japan."
Ask Alan Greenspan, Former Chairman of the Federal Reserve Board.
Mr. Alan Greenspan testified before the Aging Committee and said, "If we delay, the adjustments could be abrupt and painful."
Ask the experts at the Government Accountability Office.
David Walker, the U.S. Government's Comptroller General and head of the nonpartisan GAO stated before the Senate Committee on Aging, "Acting soon reduces the likelihood that Congress will have to choose between imposing severe budget cuts and benefit cuts or unfairly burdening future generations..."
The late U.S. Sen. Daniel Patrick Moynihan, a Democrat from New York, was a strong supporter of adding personal retirement accounts within Social Security. He noted that by allowing average people making $30,000 a year to invest a portion of their money in a Social Security personal retirement account, they would have $350,000 of savings at the end of 45 years, in addition to a traditional Social Security benefit. He summed it up this way, "In 1944 the British came up with the slogan of 'Cradle to Grave' protection. We propose something beyond: an estate!"
That's all I want for future generations - a secure retirement and a chance to build a meaningful nest egg for retirees, surviving spouses, children, and grandchildren.
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