“We can all agree that Social Security faces some challenges in the future, but dismantling the program through privatization isn’t necessary,” said DeFazio. “With a few modest changes to the program we can cut taxes for the vast majority of Americans, increase benefits for the aging and elderly, and save one of the most successful government programs ever undertaken for future generations.”

DeFazio introduced HR 3315, “The Social Security Stabilization and Enhancement Act,” late last year, as an alternative to privatization - which would only exacerbate the financial challenges the program faces. Diverting resources from the Social Security Trust Fund into private accounts could more than double the program’s financing shortfall.

According to the Social Security Trustees 2001 Annual Report, Social Security is financially sound until 2038. After that date, revenues generated by payroll taxes - called the Federal Insurance Contribution Act (FICA) taxes - will cover only around 75 percent of promised benefits.

"We don't need to burn the house down in order to save it," DeFazio argued. "With relatively minor changes we can forge a secure retirement program for Americans of all ages, while boosting the economic health and productivity of our nation." DeFazio’s bill:

• Exempts the first $4,000 in wages from the Social Security payroll tax.

• Lifts the cap (currently $84,900) on wages subjected to the Social Security payroll tax. All wages are currently subject to the Medicare payroll tax. This provision merely treats wages the same for Social Security as for Medicare.

• Increases benefits for those age 85 and over. The maximum increase would be 5 percent. The purpose behind this provision is to help the oldest Americans, many of whom are women and widowed, and who may have outlived their savings.

• Allows a portion of the Social Security trust fund to be invested in equities (stocks, corporate bonds etc.) rather than restricting investment to special-issued Treasury securities, as is the law now. Investing would be done by private fund managers, selected by an independent Social Security Investment Oversight Board. The private fund managers would be required to act only in the fiduciary interest of beneficiaries and would be restricted to investing in broad index funds.

• Increases the years of earnings used to compute benefits from the 35 highest years to the 38 highest years of earnings (to adjust for the longer working lives of Americans). However, it also allows 3 child-care drop-out years, so individuals who stay home to care for children are not harmed by the increase.

View Rep. DeFazio's Statement to the Subcommittee
View HR 3315, The Social Security Stabilization and Enhancement Act