Wednesday, March 09, 2005
Social Security Reform - Fears and Prospects
Peter Ferrara writes about what he sees as a Social Security sellout - The Washington Times: Commentary - March 09, 2005 . I certainly hope he is wrong about the Bush administration caving on personal accounts so early in the fight - doesn't sound much like this President's style.
This article cites four seperate personal account proposals that have been scored by the SSA Actuaries; and all show a path to long term fiscal sustainability - something that the current SS system cannot do. It focuses on the benefits of the Ryan-Sununu Bill which would establish very large personal accounts while guaranteeing a minimum SS benefit at least as high as currently promissed for all recipients. Seems like a great deal.
These two charts (in pdf form) S2782.pdf (application/pdf Object) show the impact of going from the current social security funding system to the Ryan-Sununu proposed system under their bills pending in both houses of Congress. The charts were prepared by the SSA Chief Actuary's Office and clearly show how personal accounts do provide long term sustainable SS benefits at least as great as currently promissed. Note the long term difference of a positive balance of $39.8Trillion for the R-S bill versus a negative balance of $12.6 for today's version of SS. That's over $52Trillion in favor of the new bill; more than enough to provide higher benefits AND to allow a substantial future FICA tax cut.
The The Ryan-Sununu Social Security Personal Savings Guarantee and Prosperity Act is the proposed bill which would provide substantial personal accounts while preserving existing promissed benefits for social security, offering these as guaranteed minimum benefits to all. It would be self-financing over the long term and even permit a FICA tax reduction to 5.11% from today's 12.4%. It has been scored by the SSA Chief Actuary. It provides for the "transition costs" by spending reductions and by short-term bonds in the near term amortized by huge savings resulting from the shift to personal accounts. The near term bonds do get paid off from savings within 30 years. This is a major departure from the current system - sort of like borrowing on a house mortgage and then paying it off and having a house plus a lot more free income later. That's a good way to use debt. On the other hand, the current system borrows just to keep paying current expenses; that way leads to bankruptcy for people or nations. .
So why don't we hear more about this? Perhaps, because a key ingredient to this fiscal magic is that it really does force the Federal Government to keep spending growth under control. No, It does not force cuts in any programs; it does require congress to keep discretionary spending Growth below an annual rate of 3.6%, about mid-way between the growth rate of the Clinton and Bush years. Read the bill summary above and see what you think. Once we get everyone to admit there is an urgent SS problem, perhaps we can get the conversation focused on how to solve the problem and use this proposed bill as a starting point for discussion and negotiation.
This article cites four seperate personal account proposals that have been scored by the SSA Actuaries; and all show a path to long term fiscal sustainability - something that the current SS system cannot do. It focuses on the benefits of the Ryan-Sununu Bill which would establish very large personal accounts while guaranteeing a minimum SS benefit at least as high as currently promissed for all recipients. Seems like a great deal.
These two charts (in pdf form) S2782.pdf (application/pdf Object) show the impact of going from the current social security funding system to the Ryan-Sununu proposed system under their bills pending in both houses of Congress. The charts were prepared by the SSA Chief Actuary's Office and clearly show how personal accounts do provide long term sustainable SS benefits at least as great as currently promissed. Note the long term difference of a positive balance of $39.8Trillion for the R-S bill versus a negative balance of $12.6 for today's version of SS. That's over $52Trillion in favor of the new bill; more than enough to provide higher benefits AND to allow a substantial future FICA tax cut.
The The Ryan-Sununu Social Security Personal Savings Guarantee and Prosperity Act is the proposed bill which would provide substantial personal accounts while preserving existing promissed benefits for social security, offering these as guaranteed minimum benefits to all. It would be self-financing over the long term and even permit a FICA tax reduction to 5.11% from today's 12.4%. It has been scored by the SSA Chief Actuary. It provides for the "transition costs" by spending reductions and by short-term bonds in the near term amortized by huge savings resulting from the shift to personal accounts. The near term bonds do get paid off from savings within 30 years. This is a major departure from the current system - sort of like borrowing on a house mortgage and then paying it off and having a house plus a lot more free income later. That's a good way to use debt. On the other hand, the current system borrows just to keep paying current expenses; that way leads to bankruptcy for people or nations. .
So why don't we hear more about this? Perhaps, because a key ingredient to this fiscal magic is that it really does force the Federal Government to keep spending growth under control. No, It does not force cuts in any programs; it does require congress to keep discretionary spending Growth below an annual rate of 3.6%, about mid-way between the growth rate of the Clinton and Bush years. Read the bill summary above and see what you think. Once we get everyone to admit there is an urgent SS problem, perhaps we can get the conversation focused on how to solve the problem and use this proposed bill as a starting point for discussion and negotiation.
