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  • Presidential Race Puts Social Security Reform Back on National Agenda

    Social Security took center stage at last night’s Republican presidential debate, emerging as a key issue among candidates at the Ronald Reagan Presidential Library in California.

    Not since President Bush’s ill-fated attempt to reform the social insurance program in 2005 have Republicans talked this much about Social Security. Of course, it’s hard to ignore. Social Security is the largest federal program. It pays out $700 billion to about 60 million Americans.

    Leaving aside the political attacks from last night’s debate, the candidates on stage at least agreed that Social Security is a problem that needs to be fixed.

    “Today’s Social Security has promised future retirees much higher benefits than it will be able to pay,” said David C. John, a senior research fellow in retirement security and financial institutions at Heritage. “However, a revised program could provide everyone guaranteed protection against retirement poverty and the means to build a comfortable and secure future.”

    Social Security’s own trustees warned of the dire consequences of inaction in their May report. The program is already operating in the red, spending $49 billion more in benefits in 2010 than it collected from the federal payroll tax. The deficit is estimated to be around $46 billion in 2011.

    The long-term forecast is even more depressing. And it’s particularly bad news for younger Americans. According to government’s own numbers, the Social Security trust fund will be exhausted by the time workers born after 1970 reach retirement age. That means Generation Xers and Millennials will spend their entire careers paying Social Security taxes with no hope of receiving the benefits currently promised.

    Earlier this year Heritage outlined an approach to Social Security reform that would save the program by transforming it into true insurance — the original intent when President Franklin D. Roosevelt signed it into law in 1935.

    Saving the American Dream” is a comprehensive plan covering entitlements, health care, government spending and tax reform. Heritage’s reforms for Social Security are modeled on a flat-benefit plan ensuring the program keeps retirees out of poverty. Even the current Social Security system can’t make that guarantee.

    The flat benefit will be phased in slowly, beginning with Millennials — those workers born after 1983. It will replace the current system’s unsustainable promise of providing benefits to all regardless of need with true insurance for retirees who need it. Under Heritage’s plan, benefits for the wealthiest 9 percent of retirees would be reduced.

    Heritage’s plan also gradually increases the retirement age and also indexes it to life expectancy, recognizing that what worked in 1935 isn’t the right approach for today’s workers and retirees. There’s also an incentive to work longer in the form of a tax deduction.

    The ultimate goal of the plan is to make Americans less reliant on government. A new savings plan that’s completely voluntary would put 6 percent of a worker’s income in their own retirement account. Workers would be automatically enrolled, promoting saving.

    Posted in Scribe [slideshow_deploy]

    5 Responses to Presidential Race Puts Social Security Reform Back on National Agenda

    1. Bobbie says:

      How come we aren't hearing anything regarding fraud, wastes and corruption in the (ss etc)administration and carried throughout? Rules regarding ANY GOVERNMENT TAX PAID BENEFITS, will have to be redefined to reflect equal application of qualification that recognizes no race, creed or culture but based only on human being. Government has freely abused those rules allowing some recipients to freely abuse the system at the consequence and loss of others.

      We'd like our social security with interest back and take care of our own matters but the money is already stolen and given to many under discriminating factors with support of the unethical bias government.

    2. Conrad2010 says:

      And no S.S. Colas again next year.

    3. RollsWrangler says:

      Social Security's atavistic pay-as-you go financing mechanism substitutes labor for capital. We owe our progressively rising standard of living to increased per-capita capital investment which substitutes capital for labor. As long as Social Security returns less than our historic long-term real GDP growth rate (3% to 3-1/4%) those individuals covered by it experience a reduced standard of living on a relative basis. When the returns drop to a level where constant-dollar benefits are less than constant-dollar withholdings, standard of living drops absolutely. What we need is a fully-funded, privately administered replacement, not a "fix" that maintains solvency but further reduced individual equity which lowers standard of living. This, in turn, demands truly sound money. 1913 $0.04 = 2011 $1.00. Progressive monetary debasement has created a demand for any asset that is a store of value other than USD, preferably a leveraged asset that can be paid off in cheaper dollars at a distant date.

    4. RollsWrangler says:

      (Continued) Our forward political program has to be one that restores risk-reserved across the entire economy (at the cost of higher savings and lower consumption) and then maintains truly stable money while concentrating on GDP growth. This program has to be a bottom-up program emphasizing sound money, individualism, self-reliance a lower combined-government share of GDP and a remarkably higher household savings rate. 3% growth for 6 years is 19.4%. Zero-growth for 6 years with the balance transferred to risk-reserves of all classes is enough to fix our whole problem. A less efficient solution, however, might last 15 years of sub-par growth with return-to-normal thereafter.

    5. vcstaab2011 says:

      Why was social security put into the general fund? This should have never happened. When you give the government money they do not know how to behave.

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