June 23, 2005

An Interesting Idea for Social Security Reform

The Wall Street Journal discusses an interesting idea for Social Security reform:

The conventional Beltway wisdom says Social Security reform is dead, thanks to near-unanimous Democratic opposition. Well, not so fast. Republican reformers are introducing a new plan to invest Social Security surplus funds into personal accounts that has the potential to shake up the debate. Wisconsin Congressman Paul Ryan and South Carolina Senator Jim DeMint are calling for legislation to bring an immediate halt to the ongoing political raid on the surplus payroll taxes collected by Social Security. Congress now spends that cash on current programs--from cotton subsidies, to defense, to the Dr. Seuss Museum. Every day that Congress fails to act, another $200 million is spent rather than being saved for future retirement. Daniel Patrick Moynihan once called this "thievery," and if corporate America were engaged in this type of accounting fraud Eliot Spitzer would be hauling CEOs to jail. Instead of spending this retirement money, the reformers would allow individual workers to divert every surplus Social Security dollar--from now until the extra cash runs out in 2016--into personal retirement accounts. For the record, we endorsed this idea some months ago, so we're glad to see it gaining steam.

For the past 20 or so years, the federal government has collected $1.67 trillion more in payroll taxes (and accumulated interest) than it has paid out in retirement benefits to senior citizens. But not a penny of this money has been saved for any worker's retirement. The surplus dollars get spent by Congress, and the Social Security system is credited with an IOU from the right hand of the government, the Treasury Department.

This is the point President Bush made earlier this year when he went to West Virginia, opened up the Social Security "vault" as it were, and pulled out stacks of these government IOUs. These are essentially a debt the government owes to itself, and where the money will come from to pay these debts is anyone's guess--though if history is any guide it will be higher taxes. Wherever the money comes from, it can't be from the Social Security "trust fund" because those dollars have already been spent.

Sounds like a great idea... The money, which is being taxed for Social Security, should be used for funding Social Security or, of course, assisting people in saving for their retirement. Yet, Congress has been using these excess taxes to fund its out of control spending...
| |

<< Home