Kerry Has No “Plan” for Social Security

Recently, Senator and presidential candidate John Kerry alleged a George Bush January “surprise” of aggressive action towards “privatizing” Social Security that will result in a future of destitution for America’s seniors while the rest of America eats cake.

It is unfortunate for the hard working people of America that Mr. Kerry has turned this critical issue into bait for his fear-mongering strategy to shore up the senior vote. Mr. Kerry should have noticed that Al Gore tried the exact same thing but was unable to fool the informed voters who know that something must be done about Social Security’s looming financial crisis.

John Kerry’s stance on Social Security reform is one that should give pause to his supporters, who would benefit the most from the President’s proposals, and be most harmed by a lack of reform. Regardless of the rhetoric Kerry uses, he cannot change the fact that the Ponzi scheme upon which the system is based is flawed at its core and will begin to collapse by 2018. Reforming Social Security with Personal Retirement Accounts (PRAs) such as the plan authored by U.S. Rep. Paul Ryan, the type of reform President Bush is calling for, would make the system permanently viable, according to the Chief Actuary of the Social Security Administration.

All workers would benefit from having a permanently solvent system that was pre-funded with individual contributions, rather than relying on the ever-shifting promises of the collapsing program that Kerry refuses to fix. In fact, the Social Security Administration calculates that a plan similar to what President Bush is supporting would result in greater benefits to retirees–130 percent of current benefits.

And certain groups would benefit even more. Women, minorities, and the poor would stand the most to gain by a system of PRAs, but continue to lose out with John Kerry’s hands-off, do-nothing approach.

Women

Social Security was established in 1935 and its structure reflects the society of that time. It discriminates against widows and women who work outside the home. According to the Cato Institute, 25 percent of married women who work receive the same retirement benefit as their stay-at-home counterparts. In the current system, twice as many women as men retire in poverty and women receive just 75 cents in Social Security benefits for every $1 a man receives. With Social Security’s pending financial shortfall, the system is expected to only be able to pay 72 percent of these already low benefits in the future. The average woman’s benefit could drop from $621 to $441.

However, if women are allowed to redirect their Social Security taxes into accounts that they own and control, like Bush’s PRAs, these problems would be avoided. These savings could not be taken away by divorce or the death of a spouse. PRAs could be passed on to loved ones, unlike Social Security, where a lifetime of contributions goes to the government as soon as someone dies, even if they have yet to collect one Social Security check.

African-Americans

John Kerry’s efforts to block Social Security reform will be particularly harmful to African-Americans, who get a raw deal from the current system. Social Security takes from those with the shortest life span and gives to those who live longest. At every age and income level, African Americans have shorter life expectancies than whites. A 65 year old black man can expect to live roughly 24 fewer months than a similar 65 year old white man—and receive 24 fewer Social Security checks, even though they will have paid the same amount into the system. The difference is not given to the families left behind, but rather kept by the government.

With PRAs, the individual, not the government, would own the account and be able to pass remaining funds on to whomever he or she chose, creating an unprecedented generational transfer of wealth within the minority community.

Middle-Class and Lower-Wage Earners

For middle class and lower-wage workers, who are most likely to become dependent upon Social Security in retirement, Personal Retirement Accounts offer an opportunity to amass real security. Lower-wage workers would be able to take advantage of an investment structure similar to a 401(k) that others enjoy. Low wage earners often lack the means to invest in accounts like 401 (k)s and IRA after 12.4 percent of their wages are taken in FICA taxes—but PRAs would be funded with the dollars already being taken out in FICA taxes, making investing and saving an option for everyone.

Mr. Kerry’s refusal to allow workers to own and control their Social Security tax dollars will particularly damage low and middle-income workers who will be left looking for answers when the Social Security system fails to deliver adequate retirement benefits. Wealthy men like Mr. Kerry can afford to save large amounts of money in IRAs and 401(k)s and will be insulated from the collapse of the system. He should allow others to protect themselves as well, with PRAs.

Despite these facts, John Kerry continues his crusade against allowing workers to own their retirement savings and to demonize President Bush’s proposal that would benefit most significantly the very people John Kerry considers his base. The people know the most dangerous and risky proposition is doing nothing at all with Social Security’s problems. Unfortunately, John Kerry doesn’t.

Cameron Sholty is Wisconsin State Director of FreedomWorks, a grassroots organization with 360,000 members nationwide dedicated to lower taxes, less government, and more freedom for all.