Wes Hickman/Kevin Bishop
Social Security is the most popular government program in American history. It has provided a safety net for millions of retirees, survivors and persons with disabilities. I know. My family is one of them.
I was 22 and my sister was 13 when we lost both my parents. The illnesses were expensive and times were tough. My sister received Social Security survivors’ benefits so I know how important Social Security is to families. That’s why my commitment to the program is strong and unwavering.
Unfortunately, Social Security as it’s currently structured is not sustainable. The program must be reformed. The problems facing Social Security are mainly due to demographic changes in the United States. The problems are serious and they include:
- Fewer workers supporting retirees. When Social Security was created, there were over 40 workers for every retiree. In 1950, there were 16 workers supporting 1 retiree. Today, the ratio is 3 to 1. Within a generation, the ratio will drop to 2 to 1.
- Cash Deficits and Reduced Benefits. The Trustees of Social Security have warned us of serious, structural problems facing the system. In 2018, for the first time in history, the program will begin to pay out more in benefits than it takes in as taxes. In 2042, the “trust fund” will be broke and unable to pay full benefits to retirees.
- Baby Boomers Retirement. The oldest baby boomers will be eligible to retire in just 5 short years. Between 2011 and 2030, the number of beneficiaries will increase 65 percent while the working, taxpaying population will increase only 8 percent.
Former Senator Daniel Patrick Moynihan (D-New York) summed it up best in the Final Report of the President’s Commission to Strengthen Social Security when he wrote, “… Social Security is in need of an overhaul. The system is not sustainable as it is currently structured.”
It’s time for Republicans and Democrats to work together to modernize Social Security in a responsible way and bring the political blame game to an end.
To keep Social Security solvent in the future, we have three choices. We can raise payroll taxes by 50 percent or cut benefits by 30 percent. The first choice will devastate the economy. The second choice will devastate those relying on Social Security. Some have suggested putting Social Security in a ‘lockbox’ will save the system. However, the Social Security Administration says even with a lockbox, the system will still go bankrupt.
Fortunately for us there is a third choice -- modernize the system through innovative reforms that include personal accounts.
The plan I introduce today combines the best of traditional Social Security system with the opportunity for younger workers at all income levels to build a retirement nest egg through personal accounts. Personal accounts would provide safe investment options similar to those now available to federal employees and improve on a system that will provide low – if not negative – growth rates for younger workers. It also provides stronger anti-poverty protections than are present in today’s system.
Current retirees, workers 55 and older, and persons with disabilities would remain in today’s system with no changes to benefits, taxes, or annual cost of living adjustments.
For workers 54 and younger, my plan gives workers the choice to join a modernized system that provides future retirees an inflation-indexed traditional benefit from Social Security that is at least as high as the benefits received by retirees today plus a personal retirement account. Workers would have the opportunity to set aside 4 percentage points of the social security taxes (up to $1,300 annually) in a personal retirement account that they would own and control.
Workers would be permitted to invest their contributions in stock and bond index funds. These investments would build value over time. At retirement, workers could draw on their account assets to help pay their monthly Social Security benefits or pass their account onto their heirs.
For the first time, workers of all income levels would be given ownership and control over part of their Social Security contributions. With greater returns, there will be more at stake. The key is to minimize any risk through diversification, long holding periods, and investor education.
A modernized Social Security system would also keep the majority of Social Security funds in the traditional system to provide a safety net.
Those who don't want to take part in a modernized system could choose to keep all their Social Security money in the traditional system and receive today’s benefit levels if they are willing to pay more to maintain that system. Initially, workers selecting this option would pay an additional 2 percent of their wages into Social Security. Unfortunately, the cost of maintaining Social Security into the future will continue to increase. So, workers would pay increasingly higher tax rates over time.
My plan makes no false promises – each option leads to solvency for the system and will substantially reduce the cost of Social Security sparing future generations from being buried under a mountain of debt.
We can save and protect the most successful domestic program in history if we act soon. If we delay, the impact of the demographic tidal wave looming on the horizon will swamp our children and grandchildren with a massive amount of debt.
If people don’t like the idea of modernizing Social Security with personal accounts, they should come up with something else. Let’s debate all of the options and examine what different plans would mean for putting Social Security back on solid footing. In the absence of reform, future Congresses will find it increasingly difficult to fund other priorities including defense, health care, homeland security, and education without skyrocketing tax rates on our children and grandchildren.
I believe the first step toward a bipartisan agreement on the pressing need to reform the system was taken earlier this year when six members of the Senate and ten members of the House of Representatives agreed to a cease-fire on Social Security.
In the letter, written by my office with Congressman Charlie Stenholm (D-TX) and Jim Kolbe (R-AZ), we pledged to defend candidates – Republican and Democrat – who support Social Security modernization and are willing to make the tough choices to address the fiscal challenges facing Social Security. No longer will we turn a blind eye to political attack ads that accuse responsible reform advocates of wanting to dismantle Social Security or slash benefits of current retirees.
It’s sad but true that some politicians will try to frighten people into doing nothing. They will say we shouldn’t prepare for any changes, the future will take care of itself or the worst possible answer, we’ll just wait and let future generations sort out the mess.
Social Security is going broke. No matter how hard we try to ignore the warnings or how far we stick our heads in the sand, we won’t fix the problem until we roll up our sleeves and get to work.
I applaud President Bush for taking the initiative to begin preparing for the eventual changes that must be made to keep the Social Security solvent. He’s working in a bipartisan manner to put the program on solid financial footing. I fully support his effort and want to be part of the effort to keep Social Security on solid ground for future generations.
When it comes to Social Security, the most devastating option we could choose is to do nothing. That would doom the system to bankruptcy and in my opinion, is simply not acceptable.