Reforming Social Security
February 24, 2004
In his State of the Union address, President Bush proposed a plan to reform Social Security -- an entitlement that is predicted to go bankrupt by the year 2017 -- so that a portion of each worker's payroll tax would be diverted into a savings plan. There, these funds would earn interest to be used at each worker's retirement, thus reducing their future dependency on taxpayers.
Many liberals, however, are concerned that it could become too costly, suggesting that such redirection of funds will require tax increases to support those already retired. A new report by the National Center for Public Policy Research indicates that these fears are misplaced:
- The report notes that, in fact, Social Security is taking in more funds today than is necessary to fund current social security needs.
- As a result, not only would President Bush's proposal reduce future expenses through added savings, but it would not need additional financing for the transition.
- Though discretionary spending through these excess funds would be reduced, the President's plan would have no adverse effect on current recipients while enabling workers to pay lower taxes.
- Even if workers taxes remained the same, investing the excess Social Security funds (about 3 percent of payroll) would significantly reduce dependency for future retirees.
Source: Amy Ridenour, "Social Security: Is New York Times Right to Call the President's Plan 'Terrifying'?" The National Center for Public Policy Research, February 2004.
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