Skip to comments.Accounts Could Replace Soc. Sec. Checks (Oh, the irony.. 'Rat commissioned study!!!)
Posted on 04/06/2005 10:11:40 PM PDT by NormsRevenge
WASHINGTON - Someone born next year who goes on to earn what the government considers a high-wage income could see his Social Security check replaced by the personal investment account President Bush has proposed, a congressional study says.
Democrats said Wednesday that the study, which they commissioned from the nonpartisan Congressional Research Service, was troublesome because it illustrated how the accounts invested in the stock market might eventually eliminate Social Security's guaranteed checks.
"President Bush says his plan is best for future generations, but this analysis shows how they would be the biggest losers. Our kids and grandkids born now might not have any guaranteed Social Security benefit," said Rep. Charles B. Rangel (news, bio, voting record), D-N.Y., who requested the study and has been a staunch opponent of the Bush proposal.
The White House disputed some of the study's assumptions, but celebrated the finding.
"If they commissioned a study that they now argue shows how personal accounts exceed Social Security, Eureka! That's the point," said Bush spokesman Trent Duffy.
The study found that traditional checks could disappear as a result of two factors: the cut in benefits the president has proposed for all people who open private accounts, and a change that would reduce traditional checks by linking their growth to an index of prices that is smaller than the currently used index of wages. The president has said he would consider that option, though he has not endorsed it.
Under both scenarios, the money that could be committed to a private account would increase while the promised traditional benefit check would be decreased, based on an offset formula discussed by the White House.
Ultimately the amount of income diverted to the account could disqualify a worker from receiving a traditional check. Whether he would receive more or less in benefits than from traditional check payments would depend on the investment performance of his account.
In one study example, a person born in 2006, who goes on to a career as what Social Security considers a "scaled high earner," would not receive a traditional check, only payments from his personal account. This year a person in that category would have annual average earnings of $56,091.
"For these individuals, their entire Social Security income would be comprised solely of their individual account proceeds," said the report.
Other wage groups, as well as people retiring before 2071, when a person born next year would be 65, would still receive some form of traditional benefit check in addition to their account proceeds, according to the analysis.
The study was released as House Republicans, just back from a two-week congressional recess, pledged to press ahead with plans for legislation this year.
"This is like being for the Civil Rights Bill in 1960," said Rep. Tom Cole (news, bio, voting record), R-Okla., emerging from a weekly meeting of the GOP rank and file. "You may not win but it makes you feel good and you're on the right side."
Rep. Roy Blunt (news, bio, voting record) of Missouri, the third-ranking GOP leader, said Social Security legislation remains a priority for Republicans, but he declined to specify a timetable for bringing it to the floor this year. He and other Republicans renewed their criticism of Democrats, accusing them of trying to block solutions to the program's financial difficulties for political gain.
"The American people understand there is a problem," said Rep. David Dreier (news, bio, voting record), R-Calif.
Republican officials who spoke on condition of anonymity said several lawmakers spoke up at a closed door meeting of the rank and file and said their constituents seemed to be warming to the idea of legislation. They offered no details.
The 13-page study was based on several assumptions, chief among them that workers will be allowed to place an increasing amount of their earnings in the private accounts. To date the president has said workers will be able to contribute up to 4 percent of the wages subject to Social Security taxes, except the amount would initially be capped at $1,000.
Bush has suggested that amount could increase by $100 annually, plus an additional adjustment for wage growth. The study's authors assume that pattern would continue until the amount diverted to the account equals the president's 4 percent ceiling.
The report also assumed the use of price indexing when determining the size of traditional benefit checks, instead of the traditional link to wages, which are expected to grow faster.
Duffy contended that idea undercut the validity of the study, saying, "It's based on an assumption that's not been decided yet, so it's an exercise in futility and it doesn't represent the president's plan. The president doesn't anticipate any benefit changes until we work with the Congress."
In year one of the program start a new "Family Fortune Retirement Fund' account for all 16, 17 and 18 year olds where they contribute 100% of taxes withheld for retirement into their own private accounts. In year two the program will include 16 through 19 year olds, in year three 16 through 20 year olds and so on. Assuming the retirement age remains 65, the current Social Security system would be retired 47 years later when the first wave of 18 years olds who started out in the "Family Fortune Retirement Fund" turn 65 years old.
As far as everyone else, we are stuck with the lame program we currently have.
For the good of the country and future generations I think it is best to create a program that guarantees the end of our current system.
The democrats don't like knowing that with Bush's plan, we could actually leave our children the balance of our retirement fund. They like the current system that leaves the government with any excess if you die.