This week, the House is in recess and will reconvene next Thursday for the inauguration ceremony of President George W. Bush.

Reforms Worth Considering

Social Security reform has emerged as the hot-button issue for 2005. While the system remains sound for today’s seniors, it needs to be fixed for our younger workers. In the near future, the baby boom generation will retire, causing a surge in benefit payments from the system. And in just 15 years, the system will be paying out more in benefits than it collects in taxes. By 2042, when workers currently in their mid-20s begin to retire, the system will be bankrupt. Doing nothing to fix our Social Security system will cost us, our children, and our grandchildren an estimated $10.4 trillion, according to the Social Security Trustees. The longer we wait to take action, the more difficult and expensive the changes will be.

Few people dispute that reform is needed, but there is substantial debate as to what those reforms should entail. It’s worth noting that in 1950 there were 16 workers to support every one beneficiary of Social Security but today there are only three workers for every beneficiary. As a result of these demographic changes, the current system cannot afford to pay our children and grandchildren’s benefits without enormous payroll tax increases or huge benefit cuts. Economists estimate that, under the current system, the payroll tax would have to rise to more than 18 percent if our future retires are to receive their scheduled benefits. Raising your taxes by that much, however, would shrink the U.S. economy and only provide a short-term solution.

A better solution has recently been proposed by President Bush – creating voluntary, personal Social Security accounts that would give younger workers the option to receive higher benefits than the current system can afford to pay. Young participants would not be required to “play the stock market” or risk losing everything in high-risk, day-trade-style stocks. Rather, there would be limitations on the risk of investments permitted in personal accounts – meaning only low-risk, low-cost options would be included. It’s also important to realize that Social Security for today’s retirees or near-retirees would not change. Another important fact is that the cost for establishing personal accounts will not add to the total cost that Social Security faces. In fact, these accounts would reduce the cost of saving the system. While it’s true that the transition would cost more upfront, it would lessen the future overall cost of benefits. With the president’s inauguration and State of the Union addresses in the near future, you are sure to hear more about reforming Social Security.

Copy-Cat Euro Style

Over the last four years, Republican tax cuts have been strongly opposed (to put it mildly) by liberals here, there, and everywhere. Europeans were among the harshest critics, repeatedly jumping on the anti-Bush, anti-American bandwagon and looking down their old-world noses at America’s conservative policies. So it is interesting to discover that over the last four years, European governments of the left persuasion have been practicing at least one conservative-minded policy that Republicans have put in place here – cutting taxes! Since 2000, the 15 members of the European Union (which includes our fine French critics), lowered their taxes by just over one percent. To really grasp the significance of this small percentage, you must realize that taxes have been climbing very sharply in Europe for decades. In fact, this is the first sustained tax reduction in Europe since records started being kept in 1965! Apparently, America’s conservative principles aren’t as hated across the Atlantic as Europe’s liberal elite would have us believe.

Forever and ever…

“The nearest thing to eternal life we will ever see on this earth is a government program.” – President Ronald Reagan