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The
Promise and Potential of Smart Social Security Reforms
Opinion Editorial by
Congressman Paul Ryan
Sunday, November 14, 2004
Since entering Congress, I have been working to
protect and strengthen Social Security so that it will be ready for the
fast-approaching retirement of the baby boom generation. Because the current
system does not operate like a typical pension program, the influx of new
retirees will put great pressure on Social Security.
Currently, all of us in the workforce pay
payroll taxes that fund the Social Security benefits of today’s seniors. Due
to demographic changes, the ratio of workers paying into Social Security is
shrinking. In the 1950s, there were about eight working-age Americans to support
one retiree. Today there are three. In fifteen years, the ratio will be two
workers per retiree. Looked at another way, it is expected that by 2018 more
money will be drawn out of Social Security to pay benefits than will be flowing
into the program.
If Washington sticks with the status quo, we
will be confronted with some painful options: cutting benefits, raising taxes,
or continuously borrowing more money.
Fortunately, there is an alternative. In order
to make sure Social Security will live up to its promise for today’s seniors
as well as their children and grandchildren, Congress must take careful steps to
fix the system, while maintaining a strong safety net for all workers.
Earlier this year, I introduced legislation to
achieve this goal and give every worker the chance for real ownership of his or
her retirement savings - something a future Congress cannot take away.
First and foremost, this proposal would not
affect current seniors’ benefits, and survivors and disability benefits would
continue as under the current system.
This legislation would give workers the
opportunity to invest a good part of their payroll taxes in tax-free personal
accounts. These accounts will give those who participate a much better rate of
return on their investment than Social Security does, while shielding them from
major risk. The federal government would back the personal accounts with a
guarantee that workers receive at least as much as Social Security promises
under current law.
Individuals who choose to participate in
personal accounts would have a selection of investment options that are
regulated for safety and soundness - similar to the way the Thrift Savings Plan
works for federal employees. This quality retirement plan has consistently
outperformed Social Security, even in times of recession.
It is very important to remember that, under my
proposal, the personal accounts are voluntary. Workers who decide to stay
in traditional Social Security can do so and receive the benefits promised to
them under current law.
Anyone who takes an honest, careful look at
this proposal can see that we are not “privatizing” the system and taking
government out of the picture. Rather, we are harnessing the power of the
market, while preserving government safeguards, and giving every American worker
the chance to own real wealth for their retirement.
The Chief Actuary of Social Security - whose
job is to evaluate the program’s finances and analyze the impact of policy
changes - found that this proposal will achieve permanent solvency for Social
Security, without benefit reductions or tax increases. In fact, it would bring
permanent and growing Social Security surpluses by 2030 and, over a longer
stretch of time, reduce federal debt by eliminating the program’s $10.5
trillion unfunded liability. The Actuary also concluded that, under this plan,
workers would amass roughly $7 trillion in today’s dollars in their accounts
by 2019, and the payroll tax could be reduced to 4.2 percent.
Another benefit of this legislation is that it
would finally achieve the goal of the “lock box” (which never became law due
to Senate filibusters). It would separate Social Security and the reform’s
transition financing from the rest of the federal budget, so Washington cannot
dip into that money for unrelated spending.
Today we are facing the best opportunity in
years to fix the problems that threaten Social Security and give people - not
politicians - greater control over their own retirement security. The President
recently said that reforming Social Security will be a priority of his
administration. As he put it: “This is more than a problem to be solved; it is
an opportunity to help millions of our fellow citizens find security and
independence that comes from owning something, from ownership.” I look forward
to working with my colleagues in Congress, regardless of party, to advance this
vital cause.
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