|
|
|
|
 |
|
|
National NewsConservative News
Giving Social Security Back to the People
Posted on: March 7, 2005
That bastion of ideas and solutions otherwise known as the Alabama State Legislature is weighing in on Social Security reform. And as usual, they are on the wrong side.
On Thursday, February 24th, the Alabama House of Representatives passed a House Joint Resolution calling on Congress to reject any effort to establish personal retirement accounts (PRA) as a means of ensuring the long-term viability of Social Security. Their reasons for opposing PRAs read like some of the press releases issued by hard-core liberal organizations and the left-leaning AARP.
According to the sponsors of the resolution, allowing workers to invest a portion of their Social Security taxes in an account that will actually belong to them would create all kinds of problems such as:
- Increasing the federal deficit by $2 trillion within 10 years;
- Cutting benefits by 30 percent for young workers;
- Cutting guaranteed benefits for the elderly;
- Hurt women of color, because they are more likely than Caucasian males to rely on Social Security; and
- Threaten guaranteed survivor benefits.
On every count, the sponsors of the resolution are engaging in scare tactics.
While the transition cost to establish personal accounts will be substantial, this cost will be 40 to 60 percent less than leaving the Social Security system unchanged. Moreover, this cost should be viewed the same way as refinancing a home mortgage. in which the homeowner pays up-front charges in order to get a lower interest rate that will save many times the cost of refinancing.
Claiming that establishing personal accounts will result in benefits cuts for the elderly and will reduce benefits by 30 percent is as insulting as it is false. Establishing PRAs will not require benefit cuts for the elderly that are already retired or are near retirement. When the AARP and other liberal groups make this claim they are simply trying to scare seniors.
The same is true in regard to the scare tactics directed toward young workers. When a young worker chooses to invest part of their Social Security tax in a PRA. the supporters of the House resolution apparently want us to believe that the money invested in a PRA will all be lost. Not only will workers not lose any money, the returns on even the most conservative investments would be almost double what people would receive from Social Security.
For example, a male living in Hamilton, Alabama, earning $36,000 per year can expect to have $216,358 in his Social Security account at age 67 with a monthly benefit of $1,889. If he were able to invest all of his and his employer's Social Security taxes in a PRA investing in federal treasury bonds, at age 67 he would have $397,116 in his account and his monthly benefit would jump to $3,235. It should be noted that these returns are based on investing in U.S. government bonds and not the stock market which could yield much higher returns.
In addition to the substantial increase in benefits, the most important point to remember is that this money would belong to the worker. If he died under the present system, his spouse would receive a $255 death benefit and a portion of his monthly benefit. If his children were over age 21, they would get nothing.
However, if this Hamilton resident had a PRA, his spouse would receive the entire balance of his account. And if she died too, the balance would be passed on their children as an inheritance. And this money would be guaranteed because the individual owns it, not the government.
Perhaps the members of our State Legislature should discuss this aspect of PRAs with low-income women and children of all colors who are so often left in or near poverty when their spouses or parents die. It is not hard to see from the example above how much better off women and their children would be if husbands and fathers could have a personal retirement account that they could leave to their families. This of course would also be true for wives and mothers.
If Congress were to approve PRAs, it would be the greatest wealth creation initiative for low-income families in our history. Far too many low-income workers do not live long enough to reap the full benefit of what they paid into Social Security and many do not live to retirement age.
This is particularly true for black families.
According to 2002 data from the National Center for Health Statistics, the life expectancy for a black male is only 68.8 years, whereas it is 75.3 years for a white male. The life expectancy is 75.7 years for a black female as compared to 80.3 years for a white female. What these statistics don't show is that the life expectancy for higher income men and women, black or white, is higher than that of low-income blacks and whites.
The members of the Alabama State Legislature who voted for the resolution are now on record that they are against allowing low-income Alabama families to actually have a chance to build real wealth and actually own something that they can pass on to their children. Hopefully, the members of Alabama's Congressional delegation will ignore this latest example of short-sighted thinking from our State Legislature.
|
|
| |
|
|
|
|
 |
|
|
| |
|
