Privatization Plan Undermines Retirement Security
The Bush administration continues its efforts to persuade Americans to support its plan to partially privatize Social Security. The president has spoken frequently about the "crisis" facing Social Security some 50 years from now. Yet, he refuses to address the two most troubling aspects of his plan that would present real problems long before 2052 -- benefit cuts and massive borrowing.
In Ventura County, there are more than 100,000 people receiving Social Security benefits. Recently, I held a community meeting in Reseda on Social Security. More than 450 people attended, with an overwhelming majority against privatizing the program.
In addition, this year, my office has received more than 1,500 calls, e-mails and letters opposing the privatization of Social Security and only 48 calls supporting such a policy.
The Social Security Trust Fund holds more than $1.7 trillion in reserves invested in U.S. Treasury bonds. According to the Congressional Budget Office, even if no changes are made, Social Security will be able to pay full benefits for the next 50 years by drawing on that reserve fund as well as future payroll contributions.
We have time to come up with a bipartisan solution that will strengthen the Social Security system for generations to come.
President Bush has done us a great disservice by recently referring to the U.S. Treasury bonds held in the Social Security Trust Fund as "just IOUs" or saying that "there is no trust fund." It should worry us when the president of the United States refers to U.S. Treasury bonds as mere scraps of paper, vaguely implying that they will not be paid.
It worries me personally because I invest in Treasury bonds. It seems particularly unfair to tell seniors that the Treasury bonds held by the Social Security Trust Fund are mere scraps of paper, while implying that trillions of dollars of bonds held by Japanese, Chinese and European investors will be paid in full.
The fact is that U.S. Treasury bonds are secured by the full faith and credit of the United States. It would be a disaster if we were to dishonor those Treasury bonds, merely so we could completely exempt the wealthy from taxation.
Plans to partially privatize Social Security would undermine retirement security by cutting guaranteed benefits more than 40 percent for future retirees, even for those who don't choose a private account.
The privatization plan would divert nearly $5 trillion from the Social Security Trust Fund over 20 years, and, thus, jeopardize benefits earned by current retirees. Someone who retires in 40 years would receive about $150,000 less in Social Security income than the current system would provide over his or her lifetime.
Moreover, diverting funds from the trust fund turns a long-term challenge into a much larger, immediate Social Security crisis.
The president claims that under his plan, you would control your "private account," and could leave it to your children. However, under his plan, at retirement you will be required to turn over most of your account proceeds to an insurance company (or a new bureaucracy), which will give you monthly income, leaving little or nothing to be passed on to your children. The money is not yours to invest as you see fit; instead, the government will choose which funds you are allowed to invest in.
In order to pay for the proposed privatization plan, the government would need to sell nearly $5 trillion over 20 years in new U.S. Treasury bonds, mainly to foreign countries. Adding to our national debt hurts our economy now and passes costs on to future generations.
Bush's plan to partially privatize Social Security, combined with his tax cuts aimed at the most well-to-do citizens, will increase our national debt by more than $14 trillion.
This compares with the $5.67 trillion national debt when Bush took office. Thus, the effect of Bush's policies will add more than twice as much to our national debt as all of his predecessors, Washington to Clinton, combined.
All Americans should seek a comfortable retirement, including IRAs, 401(k)s and similar accounts. However, any sound retirement plan starts with an inflation-adjusted lifetime annuity -- an annuity you cannot lose and you cannot outlive.
This is what Social Security provides -- and it, thus, guarantees a base level of income, even if all else fails. We should not replace a guarantee with a gamble.
-- Rep. Brad Sherman, D-Sherman Oaks, represents the 27th District in Congress, which includes roughly half of the San Fernando Valley. He previously represented the Conejo Valley