(a) Social Security reform is essential and unavoidable.
Social Security is already the most expensive government program in the United States. Of the total of $1.53 trillion in federal spending in 1995, Social Security accounted for $334 billion; by 2005, spending is expected to reach $556 billion. Moreover, changes in U.S. population demographics spell trouble for the program: birth rates are declining, longevity is increasing, and senior citizens are composing a higher and higher proportion of the population. In 1950, there were 17 workers paying into the Social Security system for every person receiving benefits; by 2010, there will be only 2 per beneficiary. By 2013, the Social Security Administration will be paying more to retirees than it collects from workers. As the baby boomers begin retiring, Social Security payments will grow exponentially, adding $10 to $15 trillion to the national debt. Without reform, Social Security is destined for bankruptcy.
Our government hides these problems by inaccurately reporting the impact of Social Security on our national debt and economy. If the U.S. were required to account for Social Security as private businesses do for their unfunded pension liabilities, the national debt would be about $17 trillion, rather than the reported $5 trillion. At current interest rates, that future level of national debt would require Americans to pay almost $720 billion annually in interest alone--about one half the 1995 federal budget. If changes are delayed, Congress will soon be forced to increase Social Security taxes to confiscatory levels, restrict eligibility, and cut already modest benefits.
Furthermore, the current Social Security system is unfair to everyone--rich, middle-class, and poor. In the past, many people collected much more from Social Security than they put into the system. Now, however, the average-wage earner who retires in 1996 will get back only 80% of the taxes he or she paid into the system, and future retirees will receive progressively smaller proportions.
(b) Partial privatization of Social Security offers a prevention-oriented solution.
Despite its problems, Social Security is an essential program because it covers 42 million people. Social Security reduces the percentage of senior households that live below the poverty line to 13%, in contrast to the 50% that would live in poverty without the program. Moreover, for nearly half of senior households below the poverty level, Social Security provides 90% of total income.
To save Social Security and our country from economic disaster while simultaneously protecting the lives and well-being of our senior citizens, the Natural Law Party recommends privatizing most of the Social Security system. Under our plan, each worker would have a personal, mandatory retirement account into which 75% of his or her Social Security taxes would be deposited. These funds would be invested in the private sector by the worker, thereby giving him or her more control over personal retirement funding and increasing the returns on investment. The remaining 25% of Social Security taxes would remain with the government and would be used to support the poor, the disabled, and others throughout the nation who had been unable to save sufficient amounts for their retirement. These funds would also be invested in the private sector, since historically the stock market has provided returns two to three times higher in the long term than those from government securities (7.26% vs. 1.81%). Currently, all Social Securities funds that are not paid out are invested in government securities--which serve primarily to finance the annual deficit.
Privatization will help ensure the financial viability of Social Security by increasing revenues and thereby maintaining benefits for future retirees. Simultaneously, privatization would stimulate economic growth for the nation by increasing investment capital, since $400 billion is collected in Social Security payroll taxes each year.
(c) The Natural Law Party¹s plan provides a safety net for all.
We recommend several additional plans to help ensure that all our senior citizens are able to live comfortably during their retirement:
€ Form an all-party commission to oversee the development of a transition plan for Social Security privatization. This plan would cover current Social Security enrollees and those who will retire soon, since these citizens would not have time to accumulate sufficient retirement investments under a new privatized plan.
€ Institute means testing for citizens on the current Social Security plan. Retirees who are earning large incomes from other sources do not require Social Security funds to live comfortably; therefore, these funds should protect those with greater needs.
€ Allow senior citizens who have low incomes to work if they so desire, thereby earning extra income that will enable them to survive without penalizing them, as under current Social Security regulations.