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Proposal Would Protect and Improve Benefits, Reduce Long-term Debt, Cut Payroll Taxes for All Workers, Create Wealth for All Workers WASHINGTON –
Wisconsin’s First District Congressman Paul Ryan today unveiled new
legislation he introduced this week – H.R. 4851, the Social Security Personal Savings Guarantee and Prosperity Act of 2004
– to ensure that Social Security lives up to its promise for all Americans,
now and in the future. The proposal
would give all workers access to a more prosperous retirement, while maintaining
a strong safety net, achieving full and permanent solvency for Social Security,
and reducing debt and payroll taxes over the long term.
In the process, this plan would make the “lockbox” that Ryan has
fought for to protect Social Security funds a reality.
At a press conference today announcing the initiative, Ryan was joined by
House and Senate colleagues and a coalition of supporters. “The retirement of the baby
boom generation will put great pressure on the Social Security system in the
coming decades. If we stick to the
status quo, down the road we will face the awful choice between cutting
benefits, raising taxes, or boundless borrowing for the foreseeable future. This is unacceptable, and we have a responsibility to stop it
from getting to that point,” Ryan said. In crafting a solution,
Ryan was guided by several principles. Namely
that: ·
All Social Security taxes should go to Social
Security. ·
Social Security reform should not affect
current benefits. ·
Social Security reform should be accomplished
without raising taxes or the retirement age. ·
Social Security reforms should improve the
current rate of return on younger workers’ investments to Social Security to
ensure that it will be there for them when they retire, without adversely
affecting the benefits of current retirees and those approaching retirement. ·
Social Security must always maintain a
retirement safety net for all workers, including disability and survivors’
benefits. ·
Personal accounts must have safeguards so
people do not sustain unnecessary risk. “First and foremost, any plan
to fix Social Security for the long run should uphold certain principles.
It must protect the benefits of our seniors. It must not raise taxes or expose people to unnecessary risk,
and it should maintain a strong safety net for all workers,” Ryan said. “It
should also stop the government from raiding the Social Security trust fund to
pay for unrelated programs. Upon
entering Congress, I fought for lock-box legislation to protect and strengthen
Social Security. The legislation I
have introduced this week would finally achieve this goal by separating Social
Security funds from the rest of the federal budget. ” “The key to fixing the
system, without any benefit cuts or tax hikes, is giving workers the option to
invest a significant part of their payroll taxes in completely voluntary,
tax-free personal accounts. These
large accounts will give them a much better rate of return on their investment
than Social Security does, while shielding them from excessive risk.
This would give every worker the chance for ownership and control over
their retirement savings, instead of the current system where the government
owns and controls everyone’s investment in Social Security,” Ryan said.
“At the same time, people who want to stay with traditional Social
Security can do so, and they will receive the benefits promised under current
law.” “This plan gives every
American worker the choice of owning real wealth for their retirement.
Today, all future Social Security benefits are upheld by politicians’
promises. This proposal saves
Social Security and gives workers the right to own their retirement savings –
something a future Congress cannot take away.” Ryan’s legislation would
allow workers to devote to tax-free personal accounts 10 percentage points of
the current 12.4% Social Security payroll tax on the first $10,000 of wages each
year. On taxable wages above that, they can shift 5 percentage
points of the 12.4% tax to their accounts.
On average, workers would be dedicating 6.4 percentage points of the
Social Security payroll tax to their accounts.
This progressive account structure allows lower income workers to keep
more of their FICA taxes in their personal account than higher income workers. The plan is completely
voluntary, and workers who decide to stay in traditional Social Security rather
than exercising the personal accounts option would receive the benefits promised
to them under current law. Those choosing to participate
in personal accounts would have a selection of investment options that are
regulated for safety and soundness – similar to the way the Thrift Savings
Plan for federal employees works today. The
federal government would back the personal accounts with a guarantee that
workers receive at least as much as Social Security promises under current law,
providing an added level of security for workers’ retirement savings. “Besides giving workers a
better deal for their retirement, this is a blueprint for permanent solvency for
Social Security, long-term debt reduction and payroll tax relief for all
American workers. Our plan will
also help control the growth rate of government spending and make sure the
short-term Social Security surpluses are devoted to strengthening Social
Security instead of other spending,” Ryan said. “Most importantly, this plan
gives every worker the chance to have real wealth and become an owner in our
free enterprise system.” The Chief Actuary of
Social Security has already scored this legislation as achieving permanent
solvency for the program, without benefit reductions or tax increases.
Under the Chief Actuary’s score of the proposal, the following
milestones would be reached: ·
Social Security achieves permanent and growing
surpluses by 2030. · Social Security’s $10.5 trillion unfunded liability – a huge federal debt nearly three times the size of the current federal debt held by the public – is eliminated. ·
By 2019, workers amass $7 trillion in today’s
dollars in their accounts. ·
The payroll tax is reduced to 4.2%, instead of
increasing to over 20% as would be necessary to cover promised benefits under
the status quo. Ryan’s legislation
takes the following four steps to finance the plan to strengthen and improve
Social Security: ·
Puts an end to Washington’s practice of using
Social Security surpluses on unrelated spending by separating Social Security
and the reform’s transition financing from the rest of the federal budget.
Instead of going to finance other projects, the short-term Social Security
surpluses projected until 2018 will help finance the transition to a stronger
Social Security system. ·
Limits the growth rate of federal spending to
an average of 3.6% for eight years, rather than the current 4.6% projection.
This still permits a higher rate of growth in government spending than
during the Clinton Administration, when spending grew at an average rate of
2.6%. ·
Brings in greater revenue from corporate taxes,
due to the new investment fueled by the personal accounts. ·
To the extent needed, provides for the sale of
surplus Social Security trust-fund bonds – in essence, paying Social Security
back for the surpluses it has lent the federal government in the past for other
government spending. |