Start the Accounts

The Washington Times (Washington, DC), May 12, 2005 | Go to article overview

Start the Accounts


Byline: Larry Hunter and Peter Ferrara, SPECIAL TO THE WASHINGTON TIMES

For decades, the federal government has raided the Social Security trust fund to finance other government spending. Social Security's surplus is taken each year to finance all the other federal programs, from foreign aid to welfare.

It is time to stop this inexcusable raiding, and give the surplus instead to workers to start their own, individual, personal accounts.

Indeed, the new bill introduced this year by Rep. Paul Ryan, Wisconsin Republican, and Sen. John Sununu, New Hampshire Republican, phases in the accounts so over the first 10 years the account option is half its full size, allowing workers on average to shift about 3.2 percentage points of the full 12.4 percent payroll tax to the accounts. The total annual Social Security surpluses projected over the next 10 years, counting tax revenues and interest on the trust fund bonds, is enough to finance this Ryan-Sununu option during that period.

Congress should consequently stop the raid on the Social Security trust funds and use the money to finance the first 10 years of Ryan-Sununu. The surplus would then finance the future retirement benefits of today's workers rather than other government spending. This is the only way to enact a true lockbox where the government can't get its hands on the money to fuel further runaway spending on other programs.

To free the surpluses for the accounts, Congress must reduce its spending at least by the surplus of Social Security taxes over expenditures each year. That money belongs to the future retirement of working people and Congress shouldn't be spending it anyway.

The government pays the interest on the Social Security trust fund bonds by issuing new bonds to the trust funds each year. To the extent needed to finance the Ryan-Sununu accounts for the next 10 years, those bonds would be issued instead to the accounts of each worker across the country. Workers would be free to choose to sell those bonds and invest the money in broader mutual funds if they desire. These bonds, of course, would not be new debt but rather money the government already owes to the trust funds under the current system.

It would also be very desirable to phase in the Ryan-Sununu budget process reforms over the first 10 years as well, including a reduction in the rate of growth of federal spending by 1 percentage point a year for eight years. …

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