President's Proposed Private Accounts Undermine Social Security
March 11, 2005
Those who attended the Town Hall meetings John Spratt and I held in Sumter and Florence last month seemed overwhelmingly opposed to President Bush's proposal to direct some Social Security taxes into the Stock Market. Of course, overwhelming is not unanimous and I want to make one thing perfectly clear, John Spratt and I do not oppose private accounts, if they are in addition to Social Security.
In his State of the Union Address, the President seemed to agree with us. In that speech he said, "Personal retirement accounts should be familiar to federal employees because you already have something similar called the Thrift Savings Plan (TSP), which lets workers deposit a portion of their paychecks into any of five different broadly based investment funds. It's time to extend the same security and choice and ownership to young Americans." The few details President Bush has revealed about his Social Security reforms, however, indicate his version of private accounts will be nothing like the TSP.
Contrary to popular opinion, Members of Congress and Federal employees have been contributing to Social Security since 1983. Federal employees who choose to participate in the TSP can invest up to 15 percent of their salaries with minimal broker fees of 57 cents for every $1,000 invested. Participants have the peace of mind of having both Social Security and a supplemental private investment available at the time of their retirement.
But what President Bush seeks to do is take money that currently goes into Social Security and use it to fund private retirement accounts that will be managed by private investors for a fee. The President proposes a broker fee of $3 for the $1,000 maximum an employee could divert from Social Security annually. The bottom line is beneficiaries' contributions will be at risk but not one dime of the brokers' fees.
This brings me to a recent letter in the Florence Morning News from Mike Reino, who has announced that he is seeking the Republican nomination to run for the seat I currently occupy. He stated that my response to him at the Town Meeting, that the issue was not as simple as his explanation, was indicative of my being "infuriated" by his presence. To the contrary, it was an attempt on my part to be respectful. And anybody with an elementary knowledge of Social Security and read his letter would understand why I felt the need to be respectful.
For those who may not have read his letter that ran on March 4th and 5th, here is what Mr. Reino wrote, "The normal taxpayer has 12.4 percent taken from their pay for Social Security. If 4 percent is taken for individual accounts, that leaves 8.4 'points,' or 68 percent of the payroll tax to support the 46 percent that are not retired, but collect benefits."
First: Mr. Reino should learn that workers have only 6.2 percent of the first $90,000 of their income withheld for Social Security; the employer contributes another 6.2 percent. Employees are not taxed and employers do not contribute on any income above $90,000.
Second: According to the Congressional Budget Office (CBO), if we do nothing, Social Security will start running at deficit around 2020, at which time the Trust Fund will kick in and we will be able to continue paying 100 percent of benefits until 2052. At that time we will be able to continue paying benefits, but only at 78 percent of current levels. Under the President's proposal Social Security will start running a deficit in 2012 and the Trust Fund will be exhausted in 2031.
Third: Also according to CBO, retirees would be better off with Congress doing nothing than under Bush's proposal. They say that the average annual benefit for a median wage earner born in the 1990s and retiring at age 65 will be $23,300. If Congress did nothing and the Trust Fund runs out, that worker will receive $18,100, but only $14,500 under President Bush's proposed benefits and individual accounts. To see how the President's proposal will affect you visit my website at http://www.house.gov/clyburn/ and find the Social Security calculator under the Feature Story. At any rate President Bush has admitted that private accounts don't solve the Social Security problem and he has stopped calling it a crisis. I am not sure why Mr. Reino can't and won't.
Social Security is a safety net for our most vulnerable citizens. Only 54 percent of Social Security recipients in the 6th Congressional District are retirees. The other 46 percent receive survivor's benefits or disability. Social Security can be extended in its current form by making any number of small adjustments or modifications like lifting the $90,000 cap or raising the retirement age one month per year to age 68.
Social Security is not, and never was intended to be, a program to build wealth or create an inheritance. That is the job of the private sector. It is the government's function to insure that the basic needs of our citizens are met, and Social Security is a shining example of our success in this regard. Let's call the President's proposal just what it is - an effort to dismantle one of this nation's most successful and compassionate achievements.