House Social Security Plan: More Government Math than Real Solution
More details on the new Social Security proposal circulating the House:
Republican Reps. Jim McCrery of Louisiana, Clay Shaw of Florida, Sam Johnson of Texas and Paul Ryan of Wisconsin announced Wednesday they were drafting a bill that would wall off the surplus payroll tax revenues Social Security is slated to receive until 2017. They propose transforming general IOUs — which the government places in Parkersburg, W.Va., as the money is spent on other government programs — into personal IOUs for each of the 110 million Americans who pay taxes into the program.
"The American people believe that there is something out there in West Virginia with their names on it," Shaw said during a news conference. "There is not now — but there will be if we pass this bill."
While the federal government would continue to spend the surplus tax money, the individual accounts would bear marketable Treasury bonds that give American workers a sense of ownership over their retirement money, as well as an inheritable asset should they die before they stop working, the congressmen said. A bill being introduced Thursday by Sen. Jim DeMint, R-S.C., has a similar thrust.
The government would continue to spend the excess revenues, a new bureaucracy would be required and the government's debt would still increase. Democrats said the plan was little different from Bush's call for personal savings accounts funded with a portion of the payroll taxes workers pay each year.
I would like this proposal a lot better if it even tried to address solvency. Instead, the excess revenue will be both spent by the government and reserved for individuals. Sounds like government math to me. Nor am I too excited that “privatization” means we can get a few Treasury bonds.
In principle, the social security surplus should have never been spent on other government programs. It should have been returned to the people in the form of refunds (optimally) or kept separate in a safe investment for later use. But the government is now addicted to the surplus and even this new proposal doesn’t solve the problem—although it at least acknowledges the money should belong to the people and not the government.
But, in the end, I don’t think this plan will create a workable privatization system. It’s not enough to just have the choice of Treasury bonds. And what happens when the surplus is gone? At least someone finally put a plan out there. Too bad Democrats don’t seem willing to work with anything that has a semblance of private accounts or maybe we could get somewhere.