SOCIAL SECURITY NEEDS A LOCKBOX
August 14, 2007
On Aug. 14, 1935, President Franklin D. Roosevelt signed the bill creating the financial safety net for the elderly -- Social Security -- into law. This week's anniversary of Social Security seems to be a terrific time to re-engage on fundamental reform of this critical system, says U.S. Rep. Sam Johnson (R-Plano).
The primary problem that must be addressed really comes down to numbers:
- In 1937, there were 42 workers for every retiree on Social Security.
- Today three workers support each retiree.
- By the year 2023, there will be just over two workers paying for each retiree.
Starting in 2017, Social Security's revenues will fall short of the amount needed to pay promised benefits. By 2041, payroll taxes will be sufficient to pay only 75 percent of benefits. If Congress does nothing, the choice for future generations will be between huge tax increases or benefit cuts.
With the baby boomers starting to retire in 2008, the time to act is now, says Johnson, who has introduced HR 2002 to reform the Social Security system. Under his plan:
- Workers get to keep 6.2 percent of their wages they now pay toward other peoples' benefits; they may save this in a personal retirement account and take advantage of the miracle of compound interest.
- They will have a sizeable retirement fund and a real asset to pass on to your loved ones.
- They will own this money, and the government will not be able to take it away from them.
- This plan offers a minimum-benefit guarantee; workers will also receive the benefits they've already earned.
- The government receives 6.2 percent to meet its obligations to those over 55 and to the disabled, widows and orphans.
Source: Sam Johnson, "Social Security needs a lockbox; Reform needed, but at least protect the surplus," Dallas Morning News, August 12, 2007.
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