WASHINGTON -- With President Bush expected to reiterate tonight his advocacy of personally owned accounts as an element of Social Security reform, The Concord Coalition urged both parties to reject “free lunch” and “do nothing” plans by facing up to the real trade-offs that must be made to reform the system in a way that is fiscally sustainable and generationally equitable over the long-term.
“The Social Security debate has gone off-track. Leaders of both parties are in denial. Too many Democrats minimize the enormous challenges facing the current system by arguing that the program's trust funds are ‘solvent' for about 40 years. Too many Republicans assume that these challenges can be met by simply creating personally owned retirement accounts. It's time to set aside comforting slogans and confront the fundamental fact that Social Security promises more in future benefits than it can deliver under current law. Over the next seventy-five years, the program's projected annual cash deficits total a staggering $26 trillion in today's dollars. That is why any responsible reform plan, with or without personal accounts, must start with cost-saving measures that close Social Security's long-term cash deficit,” said Robert Bixby, executive director of The Concord Coalition.
“Personal accounts have many potential advantages, including higher returns on worker contributions and a more reliable method of prefunding benefit promises than government trust funds. But the money to fund the accounts must come from somewhere. Funding more of Social Security's benefits is not a way to avoid the hard choices. It is the hard choice. Diverting existing FICA taxes to fund personal accounts would increase the already ballooning federal deficit and decrease national savings. Without new savings, a reform plan will not increase the productivity of tomorrow's workers, and thus becomes a zero-sum game of pushing liabilities from one pocket to another or from one generation to another,” Bixby said.
“The fact that the Social Security trust funds are projected to be solvent until 2042 does not provide an excuse to delay reform. The trust funds represent nothing more than a promise from one arm of government (Treasury) to pay off IOUs held by another arm of government (Social Security). To make good on this promise, Congress will have to raise taxes, cut other spending, or borrow more from the public. The key issue is not trust fund balance but how much paying off the IOUs in the trust fund is going to cost future taxpayers and whether it is affordable,” Bixby said.
For more from The Concord Coalition on Social Security reform:
A Concord Coalition Facing Facts Alert:
Testimony of Robert Bixby, Concord Coalition Executive Director, before the Senate Finance Committee: The Final Report of the President's Commission to Strengthen Social Security