Protecting Our Children's Future
Protecting Our Children's Future
By: Congressman Lamar Smith
March 25, 2005
Among all the issues that Congress will address this session, few will be as important as finding the right solution to preserve and strengthen Social Security for future generations.
Created in 1935, Social Security is a social insurance program that provides income to seniors upon their retirement. It is paid for by working Americans and their employers through a payroll tax on their wages. The money workers pay into the program immediately goes to pay the benefits of today's retirees. It is not set aside for future retirement payments.
This pay-as-you-go system works fine - so long as you have many workers paying in and few retirees collecting benefits. This was the case in the 1950s when 16 workers paid into the system for every one retiree receiving benefits. But America's demographics have changed.
Seniors are now living much longer then they did when the program was first created. In the 1930s the average lifespan was 62, a full three years before a retiree could collect benefits. Today, the average lifespan is 77, and retirees are relying on benefits for well over a decade.
With Americans living longer, there are more people collecting benefits, yet there are fewer workers to support them. Today, there are about three workers for every one retiree. When today's young workers retire, that number will decrease to two workers per retiree.
With fewer workers supporting more retirees, the current system simply cannot work. By 2017, it is expected that Social Security will reach a point where it pays out more benefits than it collects in taxes, creating a large and ever-increasing deficit in the program. If nothing is done, the system will eventually go bankrupt.
To ensure that Social Security is available to future generations, Congress must take steps now to reform and strengthen the program. No one believes that this will be an easy challenge. But the longer we wait to address this problem, the more difficult and costly it will be to fix.
One proposal already suggested to strengthen the program is personal accounts. This voluntary program will give younger workers more control over their retirement security by allowing them to invest a small portion of their payroll taxes in an account similar to an IRA. With this account, they will be able to build a "nest egg" for their retirement that cannot be taken away by the government and can be handed down to their children.
Personal accounts will give workers the chance to earn higher rates of return-and receive higher benefits-than the current system can afford to pay. At retirement, personal accounts will pay a portion of a worker's Social Security benefits, with the rest coming from traditional programs. Again, this plan will be voluntary. Those who want to stay in traditional programs can do so, and they will not have to use these accounts. In addition, it will only be available to those under the age of 55. For those over that age, the Social Security system will remain unchanged.
I consider personal accounts a viable idea, but it will take a number of careful and well thought-out solutions, gradually implemented over time, to stabilize Social Security.
I hope that in the coming months, Congress can come together in a bipartisan fashion and do what is necessary to protect this important program. Congress cannot pass this buck on to the next generation.
http://lamarsmith.house.gov/News.asp?FormMode=Detail&ID=601