Right way to save Social Security
Social Security spending will exceed tax collections in 2017. In 2041, the Social Security "trust fund" runs out of its special issue bonds. The federal government must then pay back IOUs to itself. Martin Feldstein, former chairman of the Council of Economic Advisers and Harvard professor, wrote an editorial in the Wall Street Journal (Oct. 8, 2007). Among items in the article, the current 12.4 percent Social Security employer-employee payroll tax won't be enough to finance the benefits specified in law as the population ages. Continuing to finance those benefits with a pure tax-financed system would require raising the payroll tax rate to more than 18 percent.
What a surprise for our children and grandchildren! Perhaps there are other ways to raise revenues?
U.S. Rep. Rahm Emanuel (D-Chicago), no front for the RNC, forwarded a bill addressing this pending crisis. The bill emphasizes the importance in starting personal retirement accounts as soon as possible. The rapid aging of the population and the imminent start of the baby-boom generation's retirement make it important to avoid delay. Mr. Emanuel's bill emphasized that personal retirement accounts would increase individuals' confidence in their retirement incomes and would raise our national savings rate, contributing to faster economic growth and less dependence on capital inflows from abroad.
The creation of personal retirement accounts can also be a first step toward correcting the fiscal problem of Social Security. Historic returns on stocks and bonds implies that a 2 percent contribution to personal retirement accounts would eventually generate enough retirement income to maintain the monthly benefits specified in current law, without any tax increase. Stocks and bonds earn enough that 2 percent of payroll contributions to personal retirement accounts would eventually do the work of a 6 percent tax-rate increase.
Save Social Security for future generations. Ask your congressman and senators to support Mr. Emmanuel's bill.
Dean Myles
Aurora