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Dan Weber’s Social Security IRA Proposal Appears in “Roll Call”

by Dan Weber – As it appeared in the influential Washington DC newspaper “Roll Call” on 12/8/11

Washington’s mood in the wake of the super committee’s budgetary collapse was summed up nicely by former Congressional Budget Office Director Alice Rivlin. Noting a hometown Redskins’ loss that same week to their hated rivals, the Dallas Cowboys, she commented: “The Redskins didn’t win, but at least they played well. I wish I could say the same for the super committee.”

That was also the voters’ sentiment — as House Members and Senators found out over Thanksgiving recess.

“I apologize every time I am in front of my constituents,” Sen. Joe Manchin (D-W.Va.) said recently about an electorate giving Congress historically high disapproval ratings.

But there is an opportunity for lawmakers facing “do-nothing Congress” charges next November to redeem themselves and show a seriousness of purpose on fiscal problems they have lacked. After surveying thousands of Members and speaking informally with key Congressional staffers, my group has devised a plan that would fix not that measly one-year, trillion-dollar budget shortfall on the super committee’s agenda but solve Social Security’s staggering and supposedly unfixable projected $21 trillion deficit.

Currently, the Treasury Department mounts a yearly $46 billion raid on what Social Security collects from workers’ paychecks and then puts IOUs in the form of bonds in the Social Security fund to make up for it.

However, as the Office of Management and Budget has been indelicate enough to note, these “IOU claims against the Treasury have no real assets behind them.” The way to solve the crisis is, as the OMB puts it, a choice between “raising taxes or reducing benefits” or a third option listed by the OMB: “borrowing more money.”

Congress always prefers to borrow money, of course, though not without some partisan fighting on the way to the usual gridlock. Thus, Republican proposals to avoid a Social Security bankruptcy by pegging the fund to economic growth leads to charges of “privatization” and images of leaving grandma to the whims of the stock market.

Whereupon Republicans respond by saying such Democratic attacks on good-faith attempts to fix the program is just more tomorrow-will-never-come political opportunism, an opportunism that will set off a 25 percent automatic trigger in benefit drops or even the full collapse of a program that will be missing $21 trillion by 2036.

Look hard enough, though, and most problems have solutions. Now cometh a plan from the Association of Mature American Citizens that not only rules out new taxes or benefit cuts for retirees but actually provides for benefit increases.

Unlike earlier proposals with private accounts, the plan is not intended to replace basic Social Security but to enhance it and keep it solvent.

Owned by the individual and therefore portable, this supplemental payroll deduction would be not only voluntary but tax-deductible and administered as individual retirement accounts as 401(k)s are now. There would be no access to these accounts, except in cases of death or disability until the age of 62. And at least 50 percent of the funds would have to be invested in safe, guaranteed interest-bearing funds.

The IRA offers an appealing windfall for future retirees. For example, a 25-year-old today who contributes only $15 a week to the IRA would get $165,407 in additional income by retirement.

If that amount were $45 a week, the windfall would be $352,389. (The IRA has a $5 per week minimum and $100 maximum.)

The IRA element is a sweetener that makes easier one major change in the program that, while not cutting benefits, does push back the retirement age. The good news is that this is not a political deal-breaker. Democrats and Republicans have already agreed on a three-year push back.

Even the politicians have had to acknowledge that in contrast to the 16-to-1 worker-to-retiree ratio at its inception in 1936, Social Security now has only three employees paying for every retiree. Additionally, the average life span is now 20 years longer. (Not to mention those credible predictions that someone born today has a 50-50 chance to live to 100.)

Some Capitol Hill staffers who are also economists think this program could well burgeon beyond expectations and have long-term collateral benefits such as encouragement of sound national habits of thrift and reinvigoration of the investment culture.

Most important, though, the plan transcends old arguments about Social Security reform and builds on what some Senators have earlier proposed. Thus, it provides a rare chance for Congress to show grumpy constituents they aren’t wholly incapable of bipartisan agreement, even on that seemingly intractable problem of Social Security.

That is something Members of Congress can discuss with their constituents without feeling the need to apologize.

Dan Weber is president of the Association of Mature American Citizens.

Read more articles by Daniel C. Weber

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32 Comments on "Dan Weber’s Social Security IRA Proposal Appears in “Roll Call”"

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Fred Shelton
4 years 9 months ago

Politicians need to quit calling Social Security an entitlement. An entitlement is not something you pay into. To most Seniors out there, Social Security is more of an insurance program as it was sold at it’s origin. It’s just like any other insurance you buy. Let’s just call all that money taken from our paychecks premiums. Yes Social Security when started was sold to the American people as a supplement. Just because a bunch of incompetent self serving politicians have misused its money not our fault, except that will elected a bunch of crooks, to congress and have kept them their for far to long.

In straight terms, leave our damn money alone.

Victor Camyn
4 years 9 months ago

The article on SS sounds good BUT: An IRA for the young 20 yr olds is not really feasable , you need more safegards in it and what makes you think you can trust the government to keep their hands off it. Have you forgotten how people already lost millions in their IRA’s already . Do you really think these young people are stupid.? Sorry, You can’t be so vague on something so important as this. Vic.

Bill Crace
4 years 9 months ago

Something doesn’t compute. When you triple the contribution, you only end up with 2.13 times the benefit. What is the story here?

Terry L. Wilson
4 years 9 months ago

It really blows my mind when I read that putting SS back to 6.2% is raising taxes when taking that 2% out last year did nothing to increase the economy, SS is already in dire straits how is this going to be benefical to our children and grandchildren, there will be less money for them. Depending on who you listen too SS was going to be bankrupt by 2036 so what they did last year will make it go broke quicker, then what are the politicans going to do? It is just a mess that no one wants to step up and fix they only think about getting reelected to there cushie jobs. One and I think the best solution is to make them pay into SS, I’ll bet it would be fixed in a hurry.

Terry L. Wilson
4 years 9 months ago

I have to agree with Glenn Shannon they need to cut welfare programs back to a level where it does not pay them to stay unemployed. All the people on welfare need to be drug tested at least once a month randomly if they are on drugs no welfare until they pass the next test.

Nancy Coffin
4 years 9 months ago

This article is difficult to read as it has left out words, incorrect words and in laying out the proposed plan, does not name it at the outset but rather depends on the readers assumptions. You need a better proof reader like me.

Jim
4 years 9 months ago
This proposal has merit. The most important by product that I see is getting people to begin to be responsible for their own retirement again. Although I am receiving benefits from the system, I am totally opposed to anything that smells like socialism. It just does not work. Social Security, Medicaid/Medicare, unemployment insurance and all other forms of government welfare need to be abolished. This kind of help for those in need belongs at the local level, neighbors and families helping their own. Larger scale programs should be operated by private organizations, not government agencies. Those who have been led to believe their Social Security benefits would be there for them, and thus they foolishly failed to provide for any of their own financial security, must be grandfathered and protected. Anyone young enough to begin building their own retirement fund should be eliminated from the system and educated about economics… Read more »
Bill Thomas
4 years 9 months ago

Let’s face it, SS isn’t going to get fixed as a national problem until Congress must rely upon it just as the rest of us do ! Having their own retirement plan, medical plan and too many perks (e.g. the latest insider trading revelation) that make them all rich before and after they leave office, has isolated Washington top to bottom no matter what your partisan alignment or loyalty may be. Somewhere over the years serving in Congress has become a career and an opportunity to become rich instead of it’s original intent of being a privilege and honor to SERVE America and their constituents. When is it going to stop – better when will a political hopeful stand up for this type of constructive change and how can we reverse this trend of the freeloaders now controlling the ballot box?

Phyllis Hackett
4 years 9 months ago

Please explain how “anchor babies” automatically become U.S. citizens simply by virtue of being born here, and receive “benefits” which many U.S. citizens have trouble accessing?? Is this the case in any other country? Also, can undocumented or illegal persons receive Medicaid, WIC, food stamps, free Medical care, taxpayor paid translators in court,etc.? Are we not still “A Nation of Laws”? Just asking..Thanks..Phyllis Hackett

William McPharlin
4 years 9 months ago
Phyllis Hackett and Terry Wilson are on the right track. Here are the facts as published in the -Yes- the AARP magazine, November, 2011 issue. Ms Quinn’s article broke down the 55 million people receiving so called “Social Security Benefits”. These are her “Facts”: 64% of the 55 million are retired workers like me. Workers are defined as those taxpayers that had paid payroll taxes (SS taxes). Note that we paid these taxes out of our paycheck, recieved the net pay but we had to pay income taxes on the gross pay before the payroll taxes were deducted. SS benefits were not taxed at all and so that was fair as we only paid taxes once on the payroll taxes. Starting in 1986 that all changed. Ronald Reagan (God bless his soul) had to agree to tax 50% of SS benefits as required by the Democrats in order for Reagan… Read more »
Raymond Ptak
4 years 9 months ago
I disagree with any IRA plan. Social Security should be remodeled after the New York State Retirement system. It is a defined benefit plan that is managed by a sole fiduciary, the NYS Comptroller. The funds are NYS constitutionally protected from the thief politicos who want money to spend that does not require them being responsible for a vote. The contributions from employees goes into a fund that is broadly invested in as many instruments as practical. This fund has never lost money, not even in the Great Depression. Our lamestream media and Wall street are against these types of plans because they don’t collect the fees from individuals as in IRAs. With social security my 30 years committed 14% of my wages. With the NYS Retirement my employer contributed an average of about 7% (varied over the years). Today I receive TWICE as much a month from my retirement… Read more »
R Robert
4 years 9 months ago

This train has passed by here before. Let’s decouple and return to something substantial that AMAC mentioned a couple of times before. Let’s get back to double-taxation of our Social Security or did something happen to call you off from pursuing this real thievery. Has AMAC dropped the ball on this one possible pursuit? If not, what is the latest to go after Washington on this issue? I would like to know more before I can no longer hear by “kicking the bucket.”

Stuart Bugg
4 years 9 months ago
The “lock box” is still intact as long as good assets back up the bonds that now occupy it. With inflation, the bonds may be more valuable than the cash in a real non- political world. We should audit the Social Security system as well as the Federal Reserve to evaluate our nation’s position before we spring-load ourselves into an either or choice about entitlements. We could allow people to opt out at age 50, which I would have gladly done, or limiting benefits to retirees who have recovered their withholding principal and have other forms of income. The Federal government has huge real estate holding that could be liquidated to redeem the bonds. According the the SS website, the government took in about 700B from payroll tax and paid 760B out in 2010 so we have a 60B problem. Cut every check by 10% or call in 60B of… Read more »
Susan Powers
4 years 9 months ago

While I would like to see Social Security privatized, I’m curious about the requirement to have 50% of the funds invested in “safe, guaranteed, interest bearing funds.” Now that’s an oxymoron if I ever heard one! In what country are intrest bearing funds, safe and guaranteed? Someone please enlighten me as our dollar will relatively worthless in the near future.

Ordman
3 years 8 months ago
Susan, Your instincts for privatization are right on. Your question about investment safety is a good one. For reference the current system is pay as you go. Even the Office of the Actuary for Social Security calls it that. The trust fund is a legislative slight of hand. Past excess payroll taxes (there aren’t any more) were spent by other parts of the government and converted to IOUs from the Treasury. And where will the Treasury get money to ‘pay back’ the IOUs? From future income taxes or debt in the form of bonds. There is no big pile of money under a mattress somewhere. Your question is about risk. The current system has already been changed (think raising the retirement age, COLA changes, taxing payments and the one they never want to tell you about, changing the benefit formula). I believe there is a great deal of political risk… Read more »
Ordman
3 years 8 months ago
Susan, Your instincts for private retirement accounts is right on. Your question about security of private accounts is a good one and deserves a lot more attention from unbiased analysts. Here is my take. For reference the current system is pay as you go. Even the Office of the Actuary of the Social Security system calls it that. The current trust fund is a legislative slight of hand. Any past excess of payroll taxes (there isn’t any more) was simply spent by other parts of the federal government in return for IOUs from the Treasury. And where does the Treasury get money to pay IOUs? From future income taxes or debt in the form of bonds. The question you are asking is about risk. Is there a risk that the federal government would change the terms of social security? They already have in the past and more are on the… Read more »
Joel Keller
4 years 9 months ago

How would the AMAC plan effect those of us already taking SS payments, if at all? I don’t see any reference to current retirees in this article.

DOVIE BROWN
4 years 9 months ago

You know if you and I stole someones money we would be put in jail .How can a president and congress get away stealing our hard earned money and not be held accountable? aren’t the laws the same for them as they are for us?
We must get the thieves out of the white house.PUT GOD’S MEN IN OFFICE, GOD BLESS AMERICA AGAIN.

clipper316
4 years 9 months ago

Amac’s program is simple and doable. It will help restore confidence in our government and help lead to government financial responsability. I am proud to be a member of AMAC and foreward many of it’s magazine’s articals to my friends. Keep pluging away bringing rationality to our Congress.

A Keene Byrd
4 years 9 months ago

Dear Fellow AMAC Members;
You’re missing the point; you must use your numbers to tell Congress what you want. You don’t ask for anything????
They work for us!!! If they don;t do what you tell them to do, FIRE THEM!!!! You did it in Oct. of this year when you took back the House; why not in 2012???
$46,000,000,000. in IOU’s every year from the Treasury Dept. Do you remember AL Gore telling you its in the “Lock Box”???? Yeah, the only thing in the Box are IOU’s; and guess who’s holding the bag??? We the people.
Tell the President of this organization (AMAC) this is a workable plan and to join with The Heritage Foundation and get this thing done,NOW!!!
A Keene Byrd
Member AMAC
Virginia

Alan Andre
4 years 9 months ago

I would like all of the congress and the house be replaced becuase our nation is going
down just like when Hitler took over. This congress and house just want to feather there own caps
and could care less what the american people want. Likle we the government get out
of planned parenthood and all the people on welfare be put to work doing something for
the money recv’d. All the people on wefare should have to pass a drug test if they don’t kick them
off wefare. If the people still keep getting pregant cut them off.
Congress won’t pass anything they can’t get there hands on the money that comes in.

Glenn Shannon
4 years 9 months ago

We are still at the point of cutting programs that have been paid for by working Americans. Yet there is almost no talk about cutting the welfare programs of people who have paid nothing into the system. The amount welfare recipients receive is by far much larger than social security recipients receive and if you don’t believe it look up all the programs available to them. Also consider that a vast amount of welfare recipients have been on the program all their life. I am sick and tired of hearing after paying into the system all my life that we should take deduction. There has already been billions of dollars already cut from the program, how much more are we suppose to cut. I will bet that the democrats would be willing to cut all benefits from seniors rather than cut welfare.

WM.PEDERSEN
4 years 9 months ago

ANDREW CUOMO THE GOVERNOR OF NEW YORK RAN AWAY FROM THE DUTIES OF THE STATE ATTY GENERALS OFFICE WHEN COMPLAINTS SURFACED OVER MIS HANDLING OF UNEMPLOYMENT INSURANCE WERE SENT ON MY WIFES GEHAST. THEN REPUBLICAN SENATOR BONICAC TOTALLY IGNORED OUR COMPLAINT LACK OF PAID FOR INSURANCE WITHOUT DUE PROCESS FOR OVER TWO MONTHS OF U/I BENEFITS……………….WHICH HAD TO BE MADE UP WITH SAPPING OUR MEAGER SAVINGS…………….FOR MEDICAL TREATMENTS. THE TEA PARTY IS CORRECT THAT BOTH PARTIES ARE CORRUPT!!!!!!! DEMOCRATS STEAL MONEY FROM THE ELDERLY AMD REPUIBLICANS WILL COVER UP THEIR CRIMINAL ACTIVITY. WE CAN SEE IT LOCALLY WITH 3 MILLION (STOLEN) FROM BOARD OF EDUCATION AND bOE PRESIDENT CANNOT SEE ANYTHING WRONG…….AND HE WAS A FORMER COP!!!!

JACK LANGHALS
4 years 9 months ago

I CALL MY REPS EACH WEEK ON SOME BILL ETC.I CAN’T EVEN REMEMBER WHAT I CALLED ABOUT YESTERDAY BUT I WILL GET A LETTER RESPONSE.IF I AM NOT SATISFIED, I CALL AGAIN WE ALL HAVE TWO SENATORS AND IN OHIO WE MIGHT AS WELL NOT HAVE ANY.THEY CANCEL EACH OTHERS VOTE EVERY BILL.WHAT A JOKE THIS CONGRESS IS.THEY ARE ONLY THERE TO GET RICHER AS WE GET POORER.AND THE STUPID PEOPLE BELIEVE IDIOTS LIKE REID,PELOSI AND SOME STUPID REPUBS AS WELL ARE ACTING IN THEIR BEST INTERESTS.

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