Archer/Shaw Social Security Guarantee Plan works

[National Dialogue Moderator <moderator>]

		    SOCIAL SECURITY GUARANTEE PLAN
		REPRESENTATIVES BILL ARCHER AND CLAY SHAW


	Our proposal saves Social Security for beyond 75 years without
cutting current benefits (including COLAs), without raising payroll taxes,
without raising the retirement age, and eliminates the Social Security
earnings limit.

	As its name implies, the Social Security Guarantee Plan is designed
to guarantee that full uncut Social Security benefits are provided to all
beneficiaries today and in the future.  This proposal does not affect Social
Security benefits in any way, other than by adding a savings feature for
current workers that will ensure full benefits can be paid to everyone in
the future when Social Security would otherwise encounter financial trouble.


	The U.S. General Accounting Office has told Congress that to save
Social Security, payroll taxes would have to be raised by 15 percent or
benefits cut by 13 percent.  (To put that in perspective, for the average
retiree receiving about $750 per month in benefits, if we relied on benefit
cuts alone to maintain Social Security's soundness we would have to reduce
monthly benefits by about $100, to $650.  Obviously, that must be avoided at
all costs.)  If we delay, even more drastic benefit cuts or tax increases
would be needed to keep Social Security up and running.  Our plan answers
this challenge of saving Social Security without raising payroll taxes,
without cutting benefits, and without direct government investment of Social
Security Trust Funds in private financial markets.

	Here's how the Social Security Guarantee Plan would work.  Each
worker covered by the Social Security program would receive an annual tax
credit equal to 2 percent of his or her earnings (up to $72,600 this year).
So if you make $20,000 you get a $400 tax credit; if you make $40,000, you
get a $800 credit; and the maximum tax credit would be $1,452 (2 percent of
$72,600).  This amount would be automatically deposited each year into a new
personal Social Security savings account, which we call a Social Security
Guarantee Account, created for each worker.  The worker could then select
from among a broad range of savings and investment options for his or her
Guarantee Account.  Account balances would accumulate tax-free throughout
your working years.  Once workers begin drawing Social Security benefits,
their Social Security Guarantee Accounts supplement funds from the Social
Security Trust Fund to provide full Social Security benefits.  For our
children and grandchildren especially, if their Guarantee Account could
provide a larger benefit than they would otherwise get from Social Security,
they and their family would receive the larger benefit - guaranteed for
life.

	If workers die before retiring, their Guarantee Accounts pass
tax-free to their children or grandchildren or other heirs, after making
sure that their survivors receive all the benefits they are owed today.
That's in contrast with the current Social Security system in which workers
can spend a lifetime paying taxes, die before retirement, and still not have
any savings to pass on to their family or heirs.  So in addition to saving
Social Security for everyone, which is our main goal, this plan for the
first time would create real wealth for all workers that they could leave to
their families.  Again, that's on top of keeping our commitment to provide
full monthly benefits to workers and their widows and children.

	Even current retirees would benefit by this plan in several ways.
First, Social Security will be financially sound for 75 years and beyond
under this plan; as Social Security's Trustees have stated, that is not the
case today.  Second, we maintain Social Security's soundness without
touching Social Security's critical inflation protections (that is, without
cutting cost-of-living adjustments or COLAs).  Finally, our plan
dramatically increases the amount that retirees can earn without
experiencing cuts in their Social Security benefits.  In fact, within 7
years this plan eliminates today's outdated "earnings limit" entirely for
all retirees.  So anyone who wants or has to work to supplement their Social
Security can do so without being penalized.  

	The Social Security Administration's independent actuaries have
stated that this plan "would be expected to eliminate the estimated
long-range OASDI (that is, Social Security) actuarial deficit...allowing
timely payments of benefits in full through 2073, and beyond."  The plan
eventually becomes self-financing, and SSA estimates that the payroll tax
could even be reduced from 12.4% to 8.9% by 2060.

	The Social Security Guarantee Plan is the way to save Social
Security without cutting benefits and without raising taxes.

Rep. Clay Shaw