Posted on 06/23/2005 5:27:41 AM PDT by OESY
The conventional Beltway wisdom says Social Security reform is dead, thanks to near-unanimous Democratic opposition. Well, not so fast. Republican reformers are introducing a new plan to invest Social Security surplus funds into personal accounts that has the potential to shake up the debate.
Wisconsin Congressman Paul Ryan and South Carolina Senator Jim DeMint are calling for legislation to bring an immediate halt to the ongoing political raid on the surplus payroll taxes....
Instead of spending this retirement money, the reformers would allow individual workers to divert every surplus Social Security dollar--from now until the extra cash runs out in 2016--into personal retirement accounts....
For the past 20 or so years, the federal government has collected $1.67 trillion more in payroll taxes (and accumulated interest) than it has paid out in retirement benefits....
DeMint-Ryan would allow workers to create individual personal retirement accounts and place marketable government bonds worth their portion of the Social Security surplus into these accounts.... After three years, workers could trade these Treasury bonds and invest instead in higher-return mutual funds containing a combination of corporate stocks and bonds....
By investing the surplus, rather than letting Congress spend it, the money would be put to better economic use and add to net national saving....
Another benefit is that Congress wouldn't be able to keep using the Social Security surplus to disguise its other spending habits....
As for the politics, this calls the bluff of Democrats who claim to be the sole protectors of the Social Security trust fund but have done nothing to stop depleting it....
Republicans are under no obligation to commit suicide by voting for benefit cuts in the House and Senate if reform has no chance of succeeding. The invest-the-surplus idea gives Democrats one more chance to join the reform party....
(Excerpt) Read more at opinionjournal.com ...
People Power
Social Security trust fund surplus per worker
Cash surplus Cash plus interest
2006 $527 $1,141
2007 546 1,198
2008 550 1,246
2009 508 1,248
2010 481 1,265
2011 450 1,281
2012 387 1,263
2013 312 1,231
2014 225 1,186
2015 141 1,143
2016 47 1,089
Total* $5,484 $16,648
* Assumes 4% interest.
Source: Social Security Administration, 2005.
The table shows the scale of the annual surplus cash payments, and how much larger they'd be if interest on them were included. The DeMint-Ryan proposal doesn't currently include interest, though we think it would be improved by doing so.
I'd rather OPT OUT of the damn thing, give me back what I've had seized, and then plan MY OWN retirement.
"After three years, workers could trade these Treasury bonds and invest instead in higher-return mutual funds containing a combination of corporate stocks and bonds.... "
I didn't hear that part. That's the only part that makes any sense. Buying treasury bonds is just allows the (fed) to continue to spend the money.
This idea puts demon-rats on the hook for insisting that the SS money be spent on other items(while they are accusing Bush of stealing SS).
Hell, I'd settle for letting them keep what they've stolen as long as they let me out in the future. We're gonna get screwed. But I'd rather just get it over with.
Good strategy to defuse the Dems opposition to PAs. The problem for Congress is that they have to make up the shortfall in revenue for other programs and/or cut spending.
This whole 'conversion to mutual funds' crap is a smokescreen. That will be like cuts 'in the future' used to balance the budget. Accounting trickery to let Bush off the hook and Congress evade a solution while claiming one.
Kids, bend over, they're gonna stick it to you again!
"By investing the surplus, rather than letting Congress spend it, the money would be put to better economic use and add to net national saving...."
This is where it gets sticky. NO ONE in congress or the Senate wants that money to be taken out of the general fund. Somehow what has already been taken out will have to be paid back and how will that happen?
In addition, let's say there is 100 billion this year that will be taken from the trust to go into the treasury and the IOU issued. How do you make up that 100 billion? You either have to cut more programs or raise taxes to fund those programs.
See? The Democrats will want to raise taxes. The Republicans will want to cut programs. Both parties know that this will knock them out of office. Solution? Do nothing. Or, let people invest after tax in tax free retirement accounts. Basically, you taxed my payroll and now I want to invest 5000 dollars a year into anything I want. That is tax free.
That might be the solution. What you will do is gradually pay down SS and let post tax dollars get directed to private accounts. Then you gradually reduce the post tax liability until it becomes a private account.
Ah, but these are real T-bills unlike the IOUs in the SS Trust Fund. They will add to our publicly held debt and will add to the 17 cents per tax dollar collected to service the debt now.
"The problem for Congress is that they have to make up the shortfall in revenue for other programs and/or cut spending."
And as long as we're fantasizing, I want a lifetime pass to Kings' Dominion and a bottomless mug of cold Hoegaarten.
Do nothing is not an option. The SS surplus starts declining in 2008 and will go in the red in 2017. Letting people invest in tax free retirment accounts won't work for the folks at the bottom end of the economic ladder. They don't have the money to save. 80% of Americans pay more in FICA taxes than income taxes. If we are going to have PAs, they should be a carve out from SS.
You have a better chance of that than getting Congress to cut spending. I suspect we will get more borrowing and a stealth tax increase of some sort.
I am responsible for the folks at the bottom of the economic ladder, why? I am not being insensitive, it is just fact. Private accounts doesn't address who pays for others, and it shouldn't.
I know something has to be done. Anyway you look at this, there is going to have to be drastic cuts and taxes hiked to make up for the surplus that was borrowed. They have to address this first. Moving to private accounts is simple. Figuring out how to pay back what was already borrowed is the problem.
I'd rather OPT OUT of the damn thing, give me back what I've had seized, and then plan MY OWN retirement.
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Yes, but then the socialist government of the united states would throw you in jail...
Good post. Thanks. The greatest FRAUD ever FORCED on FREE Americans.
Or -- they could just stop voting for bills that spend that surplus. It's like the balanced budget constitutional amendment, which says in effect, "Stop us before we spend again!" How big a deficit have Ryan and DeMint supported in the past? Where will they be later this year when the debt limit has to be increased again? And I thought the SS surplus was illusory anyway. . .
Could they not, at least, guarantee that I, or my heirs, will at least get back my principle?
Why should public employees be allowed to opt out of the Social Security program? Why should Public employees be allowed to invest in RISKY programs?
Right, the whole thing should be privitized, first by offering a lump sum, opt out, payment option to anyone who wants a refund. I'd like to receive all my contributions, all my employers' contributions, plus some interest over the years, and I'd gladly leave the Socialist Security system. I'd let the government off the hook in return for their making restitution after years of fraud.
"Ah, but these are real T-bills unlike the IOUs in the SS Trust Fund. They will add to our publicly held debt and will add to the 17 cents per tax dollar collected to service the debt now."
This is an insolvable mess. My point is to put Democrats on the spot for defending stealing the SS taxes for other spending. Republicans unfortunately cannot be trusted.
Nobody says you are personally responsible for folks at the bottom economically. My point is that any system of PAs that doesn't involve a carve out from SS does not help them. They are already paying 15.3% (employer and employee shares combined) to SS and Medicare.
If set up properly, PAs can solve SS problems permanently. They must be linked to a reduction in the remaining defined benefit portion of the proram (with a haircut). The would reduce SS future liabilities and give the recipients increased benefits combining PAs with the defined benefit portion. PAs must be factored into the total package, which involves benefit computation. SS is already a wealth redistribution scheme due to benefit computation formula. The people at the bottom get more back on their contributions than those at the higher end.
I know something has to be done. Anyway you look at this, there is going to have to be drastic cuts and taxes hiked to make up for the surplus that was borrowed. They have to address this first. Moving to private accounts is simple. Figuring out how to pay back what was already borrowed is the problem.
Not really. SS is a pay as you go system. There will have to be some short term borrowing to make up the shortfall, but the big issue is reducing our long term liability. If that is done through what amounts to prepayment, we can get the system in balance.
I favor making SS a line item in the federal budget and funded like Medicare B. We should get rid of the SSTF, which only represents a commitment by the USG to pay benefits. It is really an unfunded liability and part our national debt under intragovernmental holdings.
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