SS & Unemployment -- Diane Lassiter
- Date: Wed, 26 May 1999 15:32:08 -0400 (EDT)
- From: National Dialogue Moderator <moderator>
- Subject: SS & Unemployment -- Diane Lassiter
- Contributor: PANELIST: Senator Rick Santorum
Dear Diane,
Thank you for your observations and questions. It's good to hear from you.
Though I have not yet introduced my own Social Security reform
legislation, I am developing a plan that will soon be up on the Web site.
I look forward to the opportunity of discussing this legislation with you.
But here is a preview of my plan:
It would create a system of progressive personal accounts to be integrated
into Social Security's core benefit structure. My plan would direct
between 2-4% of the current 12.4% payroll tax into personal retirement
accounts (PRAs) modeled after the federal Thrift Savings Plan. My plan
would offer a high degree of progressivity, giving lower-income workers
PRAs that reflect a greater portion of their covered wages. The PRA
structure provides incremental contributions as workers move up the pay
scale:
4% PRA for individuals with covered Social Security wages up
to 1/4 of the wage cap (the first $18,150 of covered earnings in 1999);
PLUS
3% additional contribution to PRA for individuals with
covered Social Security wages in excess of 1/4 of the wage cap and up to
1/2 of the wage cap;
PLUS
2% additional contribution to PRA for individuals with
covered Social Security wages in excess of 1/2 of the wage cap and up to
3/4 of the wage cap;
PLUS
1% additional contribution to PRA for individuals with
covered Social Security wages in excess of 3/4 of the wage cap and up to
100% of the wage cap.
Remaining FICA taxes are used to pay benefits for existing and near-to-be
retirees, for partially funding individual old-age benefits
similar to current Social Security, for non-aged survivor benefits, as
well as disability benefits.
At retirement, individuals would receive tax-free a portion of their
PRA assets as a lump sum, and the rest would go toward funding their full
Social Security benefits.
I believe that my plan brings some innovative ideas to the Social
Security reform debate: progressive personal accounts to empower
lower-wage workers and families with real wealth creation opportunities;
making Social Security more family friendly to stay-at-home spouses for
time spent raising children; and leaving alone both the retirement age and
cost-of-living-adjustments (COLAs). Also, my plan would be optional for
those currently in the workforce and under the current system. Younger
workers would be required to be in the new retirement system.
As you may know, I have long been concerned about the viability of our
most vital social program. Because of my dedication to saving and
strengthening Social Security, Senate Majority Leader Trent Lott appointed
me as Co-Chair of the Senate Republican Task Force on Social Security. In
this capacity, Senator Judd Gregg and I led discussions and analyses among
Members of Congress about the need to reform Social Security soon and how
that reform might best be achieved. Senator Gregg and I are in agreement
that adding a personal savings component to Social Security is the a
sustainable and equitable way to secure the best retirement security for
all, and at a cost that future generations can bear.
I believe that saving and strengthening Social Security for the 21st
century and beyond is our highest legislative priority. But, as you
mentioned, there are those who would rather inject fear and demagoguery
into this debate, and seem not to care about putting Social Security on
sound financial footing. There are those who seem to have no interest in
strengthening Social Security so that it is not vulnerable to changing
demographics and remains actuarially sound. There are those who would have
us believe that another "nip" here and "tuck" there can keep our current
system afloat, completely ignoring the mounting unfunded liability
(currently some $9 trillion and growing) that faces our children and
grandchildren.
So yes, Diane, it is frustrating sometimes trying to discuss the facts
of this issue. We have undergone tremendous economic and social changes
over the past 63 years, and we have to recognize the fact that our 1935
model must adapt to an America heading into the 21st century.
Regarding your specific questions about those currently between jobs and/or
the unemployed, my plan, like most personal account plans, would actually
enhance worker retirement security compared to the current system.
Our current Social Security program is designed according to a
formula based on average lifetime covered wage earnings and the length
of time in the workforce. As such, any time spent outside the
workforce, or a lifetime of low earnings or part-time work translate
into lower Social Security benefits compared to a personal account
Social Security system.
The comparative benefit of the personal account approach, with a
portion of one's Social Security benefit coming from savings and
investment, is that any time spent outside the workforce is mitigated
because workers' money would continue to work for them and benefit
from compounding.
In traveling around Pennsylvania, I find that most people are
receptive to saving Social Security through personal accounts. I know
there are those who prefer to assess the Social Security issue in
terms of preconceived fixed notions while ignoring facts and trends to
the contrary. I agree with President Clinton who said in a speech
last year on Social Security, "We cannot be hidebound and pretend to
see the future through the prism of the past."
No longer are we talking about whether to save and strengthen
Social Security, but rather how. We must add an element of
advanced-funding to the system -- just as any insurance or pension
plan would be required to do -- and we must do it in a way that is
explicit in its costs. I believe most Americans are hungry for the
truth, and once armed with the facts of this debate will come to see
the merits of Social Security reform with personal accounts compared
to traditional ways of bringing the program's revenues and outlays
into balance, which in our present case and without fundamental
reform would involve drastic tax increases or benefit cuts.
Again, thank you for contacting me. Please let me know if you have
any further questions or comments about my Social Security reform
plan or about the issue in general.
-- U.S. Senator Rick Santorum