First Senior Group Goes on Record for Privatizing Social Security System
by Anita Cosgrove, Bureau of National Affairs
August 15, 1997
Using the 62nd anniversary of Social Security as a backdrop, the 60 Plus Association Aug. 14 became the first national senior citizens group to endorse publicly privatization of the Social Security program.
Addressing a Capitol Hill news conference, Jim Martin, president of the Arlington, VA-based group, noted that more than 24 countries have switched their government-run Social Security programs over to individual accounts invested in the stock market.
“Under the current pay-as-you-go system, Congress will have no other choice but to hike taxes, slash benefits or increase the national debt, further through fresh public borrowing,” Martin said. “The only real answer is privatizing–I prefer personalizing–Social Security while providing adequate government safeguards.”
In a report released at the news conference, the self-described conservative alternative to the American Association of Retired Persons said that instead of payroll taxes, a privatized system would require workers to deposit their money into a tax-deferred personal retirement account (IRA) where they could direct their investments as they would with an individual retirement account or Section 401 (k) plan.
“The time has come to think about Social Security’s retirement,” Michael Tanner, director of Health and Welfare Studies at the Cato Institute, said at the news conference. He explained that in 15 years, the Social Security program will begin running a deficit as it pays out more in benefits than it receives in payroll taxes.
The Social Security trust funds cannot be relied upon to pick up the shortfall, Tanner said. “The dirty little secret is there ain’t no trust fund,” he added, noting that it is being used to meet the federal government’s obligations for the general operating budget.
The projected insolvency is not the program’s only problem, Tanner said, adding: “It has become a lousy deal for most young workers.”
While today’s retirees will receive a positive rate of return from the current program, workers age 35 and younger will get less in Social Security benefits than they will have paid in taxes, according to Tanner. Social Security also is unfair to poor people who have much lower life expectancies than richer workers and to working women than it is to stay at home moms, he noted.
PRA Proposal. The retirement income for younger workers would be three to six times higher in a system of privatized accounts than it would be if Social Security’s current structure were salvaged, Tanner said.