BUSH PLAN TO REFORM SOCIAL SECURITY SUPERIOR TO KERRY'S ALTERNATIVES
September 10, 2004
President Bush says he plans to reform Social Security through the creation of personal retirement accounts in order to resolve the program's looming financial instability:
- Social Security is estimated to become insolvent by 2018.
- The federal program's unfunded liabilities -- the sum of government future benefit promises less expected tax revenues -- amounts to about $12.7 trillion.
- Social Security's unfunded liability is three times the current national debt.
Instead of relying on government promises, personal retirement accounts would allow workers to make contributions to a nest egg that they would given them greater control over when and how it is spent.
Bush argues that retirement accounts would earn a much greater rate of return than Social Security currently provides. The program would be voluntary, with workers having the option of remaining on the state-run system.
Presidential candidate John Kerry (D-Mass.) has ruled out privatizing Social Security or cutting benefits which leaves few attractive alternatives. For example:
- Raising taxes to pay for revenue shortfalls would force payroll taxes to increase to 20 percent -- a level that would likely impinge on economic growth.
- Even a class warfare strategy of reducing benefits by 80 percent for those who earn more than $200,000 would only lessen program liabilities by about 5 percent.
Source: Dorcas R. Hardy, "A Lack of Security," Washington Times, September 2, 2004.
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