Tuesday, April 25, 2006

Social Security: Larsen v. Souder

The Social Security program will collapse for younger generations if the federal government doesn't step in and make it solvent. What should Congress do to ensure that those who are paying into the program will get something back in the future?

"Larsen: Since 1983, Social Security has been working on resolving its latest funding problem. It is no closer to a solution now than it was in 1937. Social Security has earned 8.6 percent compounded continuously since 1980, but as a middleman, will pay you a 0 percent return. It's a dreadful value. There is no painless solution. The best young workers can do with Social Security is to be paid 29 cents in benefits for each $1 in taxes paid. Raising taxes, retirement age or cutting benefits will not change this fact! I propose workers retain what was the Social Security old age tax paid by employee/employer in their own accounts. We use the current $1.65 trillion in the old age trust fund to pay a means-tested benefit of $1,133 per month to each senior in need. After 10 years, the trust fund will be exhausted. Taking care of those in need is not just a worker's responsibility, but everyone's. In year 11 we use general revenues. After 37 years, about 9 percent of seniors will need assistance at any given time. Young workers would see what used to be the payroll tax of 10.6 percent replace 90 percent or more of their wages in retirement compared to 25 percent payable under Social Security."

"Souder: Originally designed in the 1930s, the Social Security system will not be able to keep up with future changes in our population. The system is already financially broken and it will start going bankrupt in 2018 and be completely bankrupt just decades later. The current program is unsustainable, and we should not wait any longer to fix it. Hoosiers have a right to a safe, secure retirement and they should have a say in how their savings are invested.

Our government made a promise to Social Security recipients and I am committed to upholding that promise. Thus, any changes we implement would not affect current recipients or those who are near retirement.

For younger workers, however, I believe that we could strengthen their Social Security system with the creation of personal retirement accounts. These accounts would allow Americans to invest a portion of their payroll tax. A successful retirement savings program already exists for employees of the federal government. It's called the Thrift Savings Plan and I believe that a similar program should be available to all Americans. "


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