SOCIAL SECURITY: The Congressional Debate Has Only Just Begun
By Congressman Jim Saxton
June 3, 2005
WASHINGTON, D.C. - The debate has begun to find ways to fix Social Security.
Due to the rising number of Baby Boom retirees, the Social Security Trust Fund is expected to be depleted in the not too distant future.
America has changed since Social Security was created in 1935.
At that time, 40 workers paid into the system for every three recipients. Today, three pay into the system for every one recipient.
Recent projections show that in 2017 Social Security will start paying out more benefits than it collects in payroll taxes. By 2041, the system will not be able to cover its promised benefits. This presents a bleak outlook for future generations. As a result, discussions surrounding the solvency of the program have begun.
In his State of the Union address on Feb. 2, President Bush revisited the facts behind Social Security's path to insolvency, and offered his vision for saving and strengthening the program. He focused on providing a long-term fix through voluntary personal retirement accounts. These accounts would allow younger workers the option to set aside a portion of their payroll taxes in order to build a nest egg for retirement. The President stated that any changes to the program must not affect those currently retired or those nearing retirement (age 55 and older).
The President called for an open and candid review of all options to strengthen Social Security permanently, and pledged to work with Congress to find the most effective combination of reforms. Since that time, many Members of Congress - from both sides of the aisle- have put forth their own plans to reform Social Security. Some are more detailed than others. Some embrace the President's views, while others take different paths. However, they are all a starting point from which Congress can begin to examine how best to save this vital federal program.
Kolbe-Boyd. The first proposal introduced in the House was authored by Reps. Jim Kolbe (R-AZ) and Allen Boyd (D-FL) in February. Their bipartisan piece of legislation to reform Social Security includes voluntary personal retirement accounts funded by payroll taxes - allowing workers to save three percent of their first $10,000 in earnings in such an account, plus two percent of additional earnings. The plan, H.R. 440, would also give low-income workers a minimum guaranteed benefit and a tax credit to be deposited into their personal accounts, and would only make changes to workers under the age of 55.
Johnson-Flake. Reps. Sam Johnson (R-TX) and Jeff Flake (R-AZ) also introduced legislation in February that would give an option of up to 6.2 percent of payroll taxes to be diverted into personal retirement accounts. This plan, H.R. 530, would apply to younger workers only, while preserving current Social Security benefits for retirees or those close to retirement.
The Shaw Plan. In February, the former Chairman of the House Subcommittee on Social Security, Rep. Clay Shaw (R-FL), introduced his plan to create voluntary personal retirement accounts that would not be funded with payroll tax revenues. This approach - commonly referred to as "add-on" accounts - would create a system that would allow people to voluntarily contribute an additional amount of wages into personal retirement accounts. This proposal, H.R. 750, provides a tax credit of up to $1,000 to participants by contributing 4 percent of their wages annually. Participants would be guaranteed payments of at least the level of scheduled Social Security benefits when they retire.
Sununu-Ryan. In April, the first bicameral bill was introduced by Sen. John Sununu (R-NH) and Rep. Paul Ryan (R-WI). Their proposal creates personal retirement accounts, allowing workers to contribute up to 6.4 percent of their wage income. To pay for this plan, H.R. 1776, Social Security surpluses that will exist until 2017 would be used, in addition to limits on federal spending and an assumption that new revenues will come from investment in personal retirement accounts.
Wexler Plan. The most recent Social Security reform plan introduced in the House - and also the first one introduced by a Democrat alone -- was unveiled on May 18 by Rep. Robert Wexler (D-FL). This bill, H.R. 2472, would address Social Security's long-term solvency issues by lifting the earnings cap on Social Security so that workers earning above $90,000 would begin paying a 3 percent tax on those earnings, to be matched by their employer.
In the Senate. There are also several being considered in the Senate. Some plans include provisions for voluntary personal retirement accounts paid for with payroll taxes. Others raise taxes by increasing the current $90,000 cap on income subject to Social Security taxes.
Another Senate proposal, like the Shaw Plan, creates "add-on" voluntary personal retirement accounts (similar to a Roth IRA) not funded by payroll taxes, with incentives for a voluntary extension of the age at which workers can start drawing regular Social Security benefits.
A third Senate reform proposal is aimed at raising the retirement age from 67 to 68. It also incorporates increasing life expectancy into the base Social Security benefit calculation, which would slow the rate of benefit increases, and offer the same options included in the Federal Thrift Savings Plan.
No Specific Plan Submitted by the President. The President has continued to bring the issue of Social Security's future to the forefront. He has concentrated on broad ideas for reform, but maintained that the details should be worked out in Congress. However, it is important to note that, to date, there has not been a bill introduced in the House or Senate specifically outlining a proposal from the White House.
In addition to bills introduced in Congress, the House Committee on Ways and Means - which has jurisdiction over Social Security - has begun to hold weekly hearings dealing with Social Security and broader retirement security issues.
It is not clear when the full House will consider any or multiple Social Security reform proposals. What is clear, however, is that important debate on Social Security is far from over. In examining the reform of any federal program, it is Congress' duty to consider all solutions to ensure that the best one is found.
With the wide variety of ideas now on the table, Congress should continue to debate the benefits and drawbacks of each. This consideration will take some time-- and rightly so. Any possible changes to Social Security must not be taken lightly.
Congress has only begun its deliberations on how to best address the solvency of Social Security. I have not yet decided to support any one plan, and will continue to consider the various proposals.
Throughout this debate, it is essential for Congress to recognize and appreciate the opinions of constituents, who must play a major role in shaping any changes to Social Security. This will help Congress can find the best possible solution to strengthen and improve Social Security for future generations.
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