SOCIAL SECURITY REFORM MYTHS
January 10, 2005
Social Security personal retirement accounts (PRAs) allow individuals to put a portion of their Social Security payroll tax towards private investment in stocks, bonds and other assets, and are the private property of the account owner.
Though PRAs give promise of saving social security from its impending bankruptcy, critics claim such reforms would do more harm than good. But these arguments against PRAs rest on incorrect and misleading information, says David John of the Heritage Foundation. For example:
Myth: The United States cannot afford to reform Social Security.
Fact: Though the transition costs will likely be $500 billion or more, the Social Security system will require additional money under any circumstances, reform or otherwise; in the long run, establishing PRAs would cost about $20 trillion less than funding the current Social Security system.
Myth: The Social Security trust fund contains assets that make Social Security secure for the next 40 years.
Fact: Instead of saving the system's annual surpluses, the federal government has been spending this money to fund other programs; the Social Security trust fund contains nothing more than IOUs which the federal government can repay only through higher taxes, massive borrowing, or massive cuts in other federal programs.
Myth: Introducing PRAs would reduce benefits to existing retirees.
Fact: For now, Social Security is collecting more than enough money both to pay full benefits to current retirees and those about to retire and to fund PRAs; later, additional money needed to pay benefits would come from general revenues -- just as if will if Social Security is not reformed.
Source: David C. John, "The Top 10 Myths About Social Security Reform," Heritage Foundation, September 30, 2004.
Browse more articles on Tax and Spending Issues