Social Security Reform and
Personal Retirement Accounts
There are twin crises facing the Social Security system, and our national political leaders cannot hide from this reality:
The first crisis is financial. If nothing is done, the system will begin running cash deficits in just 15 years and will need to be bailed out with $11.3 trillion worth of new income taxes or government borrowing to pay its bills. The program’s long-term liabilities are a whopping $22 trillion — six times today’s national debt.
The second crisis is personal. For younger workers, Social Security is becoming a bad deal. Most younger workers are likely to get a pitifully low 1% to 2% return on their FICA tax contributions. Many minority workers will actually get back less from the system than the amount of taxes they paid into it. After a lifetime of working, that is not fair.
The CSE Position:
CSE has long supported the idea of workers being able to invest a portion of their Social Security taxes in asset-building accounts — owned and controlled by themselves — that provide a real nest egg for retirement.
CSE staff with Texas Gov. George W. Bush, who supports Social Security reform and personal retirement accounts.
We believe that Personal Retirement Accounts (PRAs) are the key to giving workers a better return on the money they put into the system, a chance to accumulate real wealth, and gain personal control over their retirement security.
As we reform Social Security, we must ensure that individuals are not held hostage by regulations designed to ensure monopoly control of investments. Individuals should be free to take advantage of the latest in investment technology.
Moreover, Personal Retirement Accounts (which have worked successfully in countries such as Chile, Australia and Great Britain) are also the most sensible way to reduce Social Security’s long-term liabilities because these accounts effectively — pre-fund — the retirement costs of tomorrow’s senior citizens.
More importantly, Personal Retirement Accounts will have the most profound effect on closing the growing “wealth gap” between the nation’s rich and poor. Although more than half of all Americans now invest in the stock market, the wealth divide has been growing over the past seven years. Personal Retirement Accounts, however, would allow 100% of American workers to become stakeholders in the U.S. economy. Imagine the social implications of allowing every worker to own a piece of the American Dream.