Privatizing Social Security was a bad idea in 2005 when it was proposed by President Bush and rejected by the American people. It's still a bad idea, despite recent Republican attempts to revive it.
Three new analyses out this week make clear that GOP proposals would cut benefits for middle-income Americans, jeopardize the solvency of the Social Security Trust Fund and weaken the program's ability to keep millions of Americans out of poverty.
The Center on Budget and Policy Priorities (CBPP), the Chief Actuary of Social Security, and the U.S. Congress Joint Economic Committee (JEC), which I chair, have each weighed in on the Social Security proposal introduced by Republican Congressman Paul Ryan. While Republicans have sought to recast their proposals as modest changes to the current system, they are anything but that.
The new CBPP report finds that Rep. Ryan's proposal would reduce benefits for the top 70 percent of earners by linking Social Security benefits to change in prices, rather than changes in wages, as is now the case. Additionally, increasing Social Security's full retirement age, as called for in Ryan's plan, would reduce benefits for everyone regardless of when they retire.
According to the Chief Actuary of Social Security, the "progressive price indexing" proposal would reduce benefits by 17 percent compared to current law for a new retiree in 2050 with medium earnings ($43,000 today). The cuts get deeper over time and are steeper for higher income workers. By 2080, benefits converge at a much lower level, with little difference in benefits for high earners and medium earners. At that point, Social Security would bear little resemblance to today's program, where benefits are based on a worker's lifetime earnings.
The JEC report, prepared by the committee's Majority Staff, looks at privatization, where future retirees are able to divert a portion of their payroll taxes to private investment accounts. Privatization would allow all retirement savings accumulated by retirees to be subject to fluctuations in the performance of asset markets, including the stock market, where significant swings in returns and account accumulations are possible from year to year and even month to month.
A worker with a private account could purchase an annuity with a fixed monthly payment at the end of his or her working life. However, the size of that monthly payment depends on the timing of retirement relative to the performance of the different asset markets that the retiree had invested in. For example, a retiree who invested solely in the stock market over a 40-year work history and was expecting an annuity of $867 per month in 2006 would have received only $399 per month if he had retired in 2008.
Republicans claim that the Social Security Trust Fund would ensure that individuals who invest in private accounts will get back as much as they put in, plus indexing for inflation, even if the stock market craters. But such a guarantee - where private account holders win when the stock market is up, and don't lose when the stock market falls - must have another source of funds during bear markets. Without additional funds to pay for this one-sided bet, the solvency of the General Fund will be at risk.
While Social Security benefits are modest, they have a major impact. Without Social Security, nearly half (46 percent) of senior citizens would live in poverty, but with Social Security the poverty rate for elderly Americans falls to 10 percent. Indeed, Social Security accounts for more than 76 percent of income for middle-class seniors.
The Republicans ignore these facts and plan to radically change a program that provides economic security and peace of mind to millions of Americans. Their proposals are either a misguided belief in the stock market's ability to miraculously "save" Social Security or a cynical attempt to gut a successful program that has kept generations of Americans economically secure.
The more we learn about privatization and progressive price indexing, the worse -- and riskier -- the ideas look.
Congresswoman Carolyn Maloney represents parts of Queens and Manhattan in the House of Representatives, where she chairs the U.S. Congress Joint Economic Committee.
Robert Lenzner: The Ten Most Serious Problems Facing the Stock Market and Economy
Richard Barrington: The 10 Best States for Retirement (PHOTOS)
The social security program would be in great shape today if the greedy people that are now ,and in the past ,that are running this country would stop spending our money. I believe this to be true even with the present ratio of contributors/retirees.
Like Warren Buffet said'take the cap off people like me,we would never feel the difference"
And haven't foreign countries, starting with Chile, privatized their SS systems with generally good results?
Another SS problem is that whites outlive blacks; is the system bigoted?
No, Chile didn't do well privatizing. There were some who retired without any money. They had to go back to set up a program with the government involved.
It is the higher earners that are living longer. The average worker is only living 2.5 years longer and the higher earner is living 6.5 years longer than they did when Social Security started benefits.
That is where the unfairness is. The higher earner should pay more in but draw less benefits.
The only problem is how the government is going to pay back the fund they spent giving tax breaks to the rich.
The Social Secuity fix-it book, for those who want to learn rather than shout.
http://crrÂ.bc.edu/spÂecial_projÂects/the_sÂocial_secuÂrity_fix-iÂt_book.htmÂl
If this bold idea is pursued aggressively, it would prevent future oil spills and save jobs, the budget, the economy and the environment and cost nothing.
For links to Youtube and iReport videos go to
http://whiÂtecollargrÂeenspace.bÂlogspot.coÂm/
I shared this plan with the Select Committee for Energy Independence and Global Warming and Secretary Chu's office at the Dept. of Energy. It is out of the box thinking that is based on proven principles, low cost, and with no negative environmental impact. Aggressively implementing it would be much less costly that another oil spill. This initiative is even more relevant since Bernanke stated that we must get the Federal deficit under control and Obama is ordering all dept's to cut budgets by 5%.â€
Great idea. How will humans in the future ever look back and see us as a civilized society when when have so many public and private buildings that sit empty 70 to 90% of the time while millions of impoverished citizens are homeless, starving, and riddled by disease and malnutrition? We should require all future buildings to be built for dual use so we can feed and house those in need and out of work when they are not being used for their primary purpose. Too many churches, schools, and other government and private buildings sit empty and thus are monuments to our greed and lack of empathy. What a waste of our precious resources to build great structures that are used in such an inefficient manner. Remember when the Soviets had dual use commercial aircraft that could be converted quickly for war time use. We can do it!
http://tpmdc.talkingpointsmemo.com/2010/07/rand-paul-in-the-90s-medicare-is-socialism-and-social-security-is-a-ponzi-scheme-video.php
http://www.youtube.com/watch?v=6BCa8xw9yGY&feature=player_embedded
This whole thing stinks to high heaven. France is rioting because the retirement age was raised to 62!
As a senior citizen, these benefitss account for half of our income, along with withdrawals from our IRA.
Why would they vote against their own interests??
We need to scream even louder than the nut jobs out there. Mobilize - talk to your neighbors, friends etc. I button hole people in the dog park.