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Congressional Corner: The Debate Over Social Security Is Far From Over
By Representative Charlie Gonzalez (TX) Social Security is not just a "retirement" plan. It's an "insurance" program that serves as a safety net. You pay a "premium" (payroll tax) and collect a "benefit" (Social Security check). That's an important distinction that cannot be dismissed without changing the very nature of Social Security. Workers and employers contribute to Social Security during working years, and because revenues have exceeded expenditures, the excess monies go into an interest-earning Trust Fund. The monies in that Trust Fund constitute the revenues available to pay Social Security recipients. In 2018, payroll taxes alone will not be sufficient to cover payment of benefits. However, payroll taxes plus the interest payments received by the Trust Fund from the United States government will be sufficient to cover 100% payment of benefits until at least 2042. Experts disagree on the exact year, but sometime between 2042 and 2052, Social Security will only have enough to pay about 75% of the currently promised level of benefits because payroll tax revenues plus interest to the Trust Fund will not be enough to pay full benefits to the number of qualified recipients. Proposals for addressing this anticipated shortfall are numerous and range from raising the retirement age, to increasing the cap on wages that are subject to the Social Security tax, to increasing the payroll tax, and even adjusting benefits to reflect changes in life-spans. And then there is President Bush's proposal to create private accounts that work outside the current system. The President has thus far spoken in the most general terms so it is difficult to share real specifics. One thing we do know is that it will take an estimated $2 trillion to convert the present system to pay for the President's privatization plan. To cover that, the U.S. government will either have to borrow the money or raise taxes. Introducing investment risk, additional administrative costs, and incurring additional borrowing or increasing taxes to cover transitional cost is a calculated strategy, not to strengthen Social Security but to weaken and eventually replace it. That is why I believe this debate should not be about picking one over the other, sacrificing the stability of Social Security for the purpose of building a government supported private account system. Instead, we should strengthen the Social Security system by making necessary adjustments from within, as we have done in the past, and we should adopt additional federal policies that promote individual savings and the creation of retirement plans as add-on supplements to Social Security. Such a solution would give people the ability to build their retirement accounts without weakening the "safety net" of Social Security. March 2006 | ||||||||
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