Isn’t this privatization of Social Security just a warmed-over version of what President Bush proposed a few years ago – that failed to get even Republican support?
The Roadmap does not privatize Social Security – it saves Social Security. It keeps the current system in place with no changes for those over 55. For those under 55, the Roadmap provides the option to either stay in the traditional government-run system or to enter a system of personal accounts. Neither option is privatized. In the personal accounts system, the accounts and investment options will be managed and overseen by a public Social Security Personal Savings Account Board – not a stock broker or private investment firm. People who choose the enter the reformed system will select from a handful of government regulated options—similar to the retirement plan the Members of Congress and federal employees use.
Why not simply raise the cap on income subject to the payroll tax to make the program solvent?
We cannot tax our way out of this crisis. While many argue that we can merely raise the cap on income subject to the payroll tax, this would not make Social Security solvent. First, without ‘lockbox’ legislation requiring Congress to earmark additional funds for future beneficiaries, it is likely that any additional funds would be spent. Next, under Social Security’s current structure eliminating the cap on income entirely would only delay the onset of cash deficits in the Social Security program until 2024. This does nothing to address the long-term fiscal deficit facing Social Security, and would merely postpone the inevitable collapse of Social Security.
More to the point, this would be the largest tax hike in the history of the United States. This new tax burden would fall disproportionately upon the very job creators so desperately needed with millions of Americans out of work. Approximately 1/3 of those affected by this tax hike would be the small business owners, the self-employed and farmers who drive our economy and will we are relying upon to create the much-needed new jobs. A total of almost 9.2 million individuals would see a massive increase in their taxes, and we would be no closer to resolving the long-term fiscal problems associated with Social Security.
Considering the turbulence in the stock market, isn’t it unwise to turn seniors over to an uncertain market, and count on it for their retirement?
First, it is important to note that no matter what happens in the stock market, participants who choose this option are protected against the possibility of a negative outcome. Participants that opt to use the personal savings account are guaranteed that they will not lose a single dollar they put into their accounts, even after adjusting for inflation. Additionally, according to a distributional analysis done by the Congressional Budget Office, low-income individuals actually receive a higher benefit than they are scheduled to receive under current law.
The personal retirement accounts have built-in safeguards to minimize risk, while still allowing for growth far above the chronically low rates of return in our current system. The real risk to individuals contributing to Social Security comes in the form of those clinging to the status quo. With each passing year, it is more difficult to fulfill the promises made to those who have organized their retirement around Social Security. If we do not place Social Security on sound financial footing now, there will be painful adjustments in the years ahead. In contrast, by allowing individuals to build real wealth through ownership and opportunity, we would improve future seniors’ standard of living as well as helping our children or grandchildren get a leg up in life through inheritable accounts.
Isn’t “modernizing the retirement age” just hiding the plan’s benefit cuts – by making people work longer before they can retire?
This plan merely extends the gradual increase in retirement age already occurring under current policies. In 2026, the retirement age will be 67. The proposed gradual adjustment would increase the normal retirement age by one month every two years. At this rate, the normal retirement age would remain below 70 years until next century. More importantly, this plan will provide protection to individuals who wish to retire early. As long as an individual has accumulated enough funds to purchase an annuity above the poverty line, early retirement remains an option for those who wish to.
It is important to recognize that when Social Security was enacted, the average life expectancy for men in America was 60 years old; for women it was 64. Today, average life expectancy has increased to 75 years old for men and 80 for women. Our country’s social insurance strategies of the 20th century must reflect the realities of the 21st century.
AARP is the leading national advocate for seniors. How can you say this program is good for seniors if AARP doesn’t support it?
The trustees of Social Security have been clear that the program is going bankrupt – and I think it is wrong to stand idly by and do nothing. I understand that not everyone will agree with my plan – that’s alright. This proposal, if nothing else, will hopefully move the discussion forward. Congress must act to protect Social Security, and I appreciate the deep commitment that the AARP has in its mission to provide retirement security to seniors. Like the AARP, I agree that Social Security is woven into the American fabric, and is a promise that needs to be protected – which is all the more reason we need to act. Social Security cannot remain solvent in its current form, and if we are serious about keeping our promise to America’s seniors, we must work to put Social Security on sound financial footing.
It is also worth mentioning that a previous version of this proposal has received the strong support from other organizations that represent the interests of senior citizens. According to James Musser of the American Senior Benefits Association, “[Congressman Ryan] may prove to be the best friend seniors ever had as the man who saved Social Security and Medicare” (ASBA Update, June 2008).
Finally, the plan is voluntary. No one is forced to have a personal account. Individuals may remain in the current system if they prefer.