Social Security Should Be Replaced
Social Security is the largest domestic federal program. It is funded by the largest tax paid by most workers, and is the largest source of income for most retirees. The program provides benefits to the elderly, to the disabled and to the families of eligible workers who have died. Thus, it is relied upon by some of the most vulnerable people in our society. It is also growing insolvent. As currently designed, the program has practically no chance of remaining financially sustainable in the coming decades, says Andrew G. Biggs, a resident scholar at the American Enterprise Institute.
- Over the next decade, the Social Security program will provide about $984 billion more in benefits than it will collect through the payroll tax that is intended to fund it, according to the 2013 report of the program’s trustees.
- Social Security can continue paying benefits for now because it ran a surplus over the past three decades; the extra funds were lent to the Treasury for use on other federal programs, and as those loans are repaid, they can be spent by Social Security.
- The program’s trustees report that, over the long term (by which they mean the next 75 years), Social Security will be underfunded by an astonishing $9.6 trillion.
Social Security Personal Accounts: Prosperity for All
In 2010, Social Security began running a cash deficit that will continue until 2033, when the Social Security trust funds run out of money. To pay for all of the promised Social Security and Medicare benefits would require almost doubling the current total payroll tax of 15.3 percent to nearly 30 percent, says Peter Ferrara, a senior fellow with the National Center for Policy Analysis and the Heartland Institute.
Social Security reform has already worked in the United States.
- In 1981, public-sector workers employed by Galveston County, Texas, voted to opt out of Social Security into a new defined-contribution plan under a provision of federal law that allowed state and local government workers to make this choice.
- The following year, Matagorda and Brazoria counties voted to join them.
- Under the plan, 9.737 percent of a worker’s salary is contributed and goes to First Financial Benefits of Houston, which then lends the money long-term to top-rated financial institutions for a guaranteed interest rate, which has averaged between 7.5 percent and 8 percent.