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V I E W P O I N T
Privatization Proposals Using the Social Security Surplus
On June 23, 2005, Senator Jim DeMint (R-NC) introduced S. 1302, legislation that would permit the use of Social Security Trust Fund surpluses to fund individual private accounts; and on July 14, Representative Jim McCrery introduced a similar bill, H.R. 3304, the "Growing Real Ownership for Workers Act of 2005." Senator DeMint describes his proposal as a way to ensure that the Social Security surpluses are not spent on other government programs. In his remarks when he introduced the legislation, Senator DeMint said, "...it's time to stop the raid on Social Security...Stopping the raid will strengthen Social Security and is the first step toward long-term reform."
In reality, the DeMint and McCrery bills use money intended to pay Social Security benefits to create a private account system that Americans have already rejected. Because these accounts would be required initially to be invested in U. S. Treasury bonds, the funds would continue to be spent to fund other government programs. They are no different than Social Security privatization proposals promoted by President Bush and others. They would undermine Social Security by cutting benefits. Moreover, they would add to our federal debt and would not close Social Security's long-term funding gap.
National Committee Position
The National Committee to Preserve Social Security and Medicare opposes taking money out of Social Security to pay for private accounts and, therefore, opposes S. 1302 and H.R. 3304. Like the President's proposals, the DeMint and McCrery legislation would take money from Social Security and put it into private accounts, which ultimately would result in cutting Social Security benefits and increasing the federal debt.
The DeMint and McCrery plans:
Are the first steps toward President Bush's plan to privatize Social Security. Every dollar that is put into private accounts brings us closer to dismantling Social Security. In other words, it puts us closer to replacing Social Security's guaranteed benefits with private investment accounts.
Would not prevent Social Security surpluses from being used to fund other government programs. Because the surplus-funded private accounts could only be invested initially in U. S. Treasury bonds, the government would continue to use the Social Security surpluses to pay for other programs.
Would increase the federal debt. The Social Security actuaries have estimated that the DeMint and McCrery legislation would add about $1 trillion to the national debt in just the first ten years. The cost of this increased debt would be borne by every generation for at least the next 75 years. In addition, the costs of administering the plans are estimated to be at least $25 billion through 2016, with additional costs through at least 2080.
Could result in lower retirement income for people who chose private accounts. Under the DeMint and McCrery plans, beneficiaries who chose private accounts might find themselves considerably worse off, due to fluctuations in the market, than they would have been under Social Security. Workers would be required to pay back to the Social Security system all of the money that was diverted to the private accounts and more. Under these plans, a worker whose private account did not earn a rate of return of more than 2.7 percent above inflation would lose money - his or her Social Security benefits would be cut by more than the private account would provide in retirement income.
Government Relations and Policy, July 2005
The National Committee is a nonprofit, nonpartisan organization that acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the board of directors and professional staff. The work of the National Committee is directed toward developing a secure retirement for all Americans.