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The following remarks are from CSE President Paul Beckner on todays comments by Secretary Summers on Social Security.
Secretary of the Treasury, Lawrence Summers today made a play for his job security by attacking Gov. George W. Bush’s Social Security and tax relief plans.
As a Social Security Trustee, Summers should know better. He knows that the Social Security system has a $22 trillion shortfall over the next 75 years which will require a 50 percent decrease in benefits, a 30 percent increase in payroll taxes or unprecedented increase in income tax dollars necessary to sustain the system. No reform is clearly the riskiest course. Summers should also know that it isn’t Bush’s plan that “will require either ‘large cuts’ in guaranteed benefits or an infusion of billions of dollars in new revenue.” Rather, his statement more closely describes Vice President Al Gore’s plan to do nothing to reform Social Security. Gore wants to tack on another government entitlement on top of Social Security. What are we doing here? Rearranging deck chairs on a sinking ship?
Summers also says that money collected now can’t pay current benefits if it is “channeled into investment accounts.” This is simply not true. Let’s do some basic math: The current overall surplus for the next 10 years is an estimated $4.6 trillion. Of that, $2.4 trillion is Social Security surplus and $2.2 is non-Social Security. There is $2.4 trillion over and above what is needed to cover benefits for current and near retirees—that is what is meant by a surplus.
Under the Bush plan, $1 trillion of the $2.4 trillion Social Security surplus will be allowed to be used by today’s workers to establish personal retirement accounts. This will help make the system financially sustainable for younger Americans. There is still another $1.4 trillion of the Social Security surplus left. Gore would spend the entire $2.4 trillion on “buying down debt” and do nothing to reduce Social Security’s long-term liabilities. Furthermore, he does nothing to improve the poor rate of return that younger workers will get from the current system.
Summers fraudulently misrepresents Governor George W. Bush’s plan to allow workers to invest a small portion of their payroll taxes while also paying down the debt. It is not too much to assume that this can all happen while also giving tax relief to every American taxpayer. Bush’s Social Security plan will be carved out of the current Social Security plan. It will not be an add-on, government subsidy like Gore’s proposal.
Now, the $2.2 trillion non-Social Security surplus is what is left. Bush would return $1.3 trillion in tax cuts to every American taxpayer, and provide $158 billion to reform Medicare. Gore will spend $500 billion in “targeted” tax cuts for a limited number of Americans who qualify for tax relief under arcane guidelines. Gore also spends more than $250 billion on a prescription drug plan for seniors.
Gore’s approach to Medicare is similar: tack on yet another government entitlement on top of a failing Medicare system without tackling the system’s underlying problems. On the other hand, Bush’s proposal (founded on a national bipartisan commission’s recommendations) recognizes the failure of Medicare to meet the health care and prescription drug coverage needs of America’s seniors, and works to address those failures responsibly, not just rhetorically.
Bush’s proposal directs $158 billion from the non-Social Security surplus to provide seniors with prescription drug coverage options while bringing more health care choice and competition to seniors and addressing the system’s long-term financial viability.
The truth is that Summers needs to stop scaring seniors and start giving Americans the whole truth.