By DEROY MURDOCK
Scripps Howard News Service
June 30, 2005
While Democrats "just say no" to his voluntary personal retirement accounts, Republicans are making them an offer they may be unable to refuse: Help the GOP stop raiding the Social Security Trust Fund, or vote to continue Uncle Sam's biggest swindle.
Sen. Jim DeMint, R-S.C., and Rep. Paul Ryan, R-Wis., lead this effort. They would create "Growing Real Ownership for Workers" accounts that would be voluntary, personally owned, and inheritable. While these GROW accounts would be smaller than those Bush advocates (4 percentage points of each participant's 12.4 percent employer/employee payroll tax) _ they would be financed by the Social Security surplus, namely taxes collected above and beyond the system's benefit payments.
Americans may believe this money is conserved for the future. Sorry. It vanishes as quickly as Congress sees it. To understand how, try this experiment:
Open your wallet. Remove $100. Buy a new T-shirt, some socks, a decent lunch, two movie tickets, and beers with a friend afterward. Now, place in your wallet a slip of paper that reads: "I owe me $100 when I retire."
Social Security is financed similarly.
In fiscal year 2005, for instance, the Social Security system will collect $496.7 billion in payroll taxes, $14 billion in taxation of benefits, and $83.6 billion in congressionally appropriated interest. Of this $594.3 billion, seniors will receive $433.7 in benefits, while $6.5 billion will cover administrative costs. This $154.1 billion balance is the Social Security surplus.
This money is not invested in stocks, real estate, or even Picassos. Since 1983, Congress has spent $1.67 trillion of this cash on food stamps, cruise missiles, the space shuttle, Amtrak, etc. In its place, non-traded Special Issue Treasury Notes sit in the so-called Social Security Trust Fund, a filing cabinet in Parkersburg, W.Va. These pieces of paper obligate future Congresses to collect taxes tomorrow to finance Congress' bipartisan spendaholism today. There are no underlying, marketable assets involved, just the anticipated political will of future elected officials to shake down citizens who currently populate America's K-12 classrooms.
This is legalized Enron accounting. DeMint, Ryan, and their co-sponsors would end this spectacular fraud and, as the Wall Street Journal's Steve Moore says, "place this money in 140 million individual lockboxes across the country."
Once Americans under 55 who so wish deposit their shares of this money into their GROW accounts, Congress cannot use those funds simultaneously to mask its addiction to spendahol.
"Ever since I came to Congress, I have been fighting to stop the raid on the Social Security surplus," Ryan stated June 22. "This puts us on a path to do just that."
GROW accounts would ignore the portion of payroll taxes dedicated to today's Social Security benefits. So, seniors can relax. Their checks will stay untouched.
While these accounts initially would contain marketable Treasury bonds, in 2008, participants could choose to diversify into stocks and index funds. The Social Security Administration assumes modest management expenses of 0.3 percent of account balances.
According to the SSA, a 44-year-old earning $36,600 would retire with an account worth $9,783 to $13,096, depending on his preference for bonds or diversified investments. A 34-year-old earning $58,600 would retire with $19,117 to $30,606. Come 2017, surplus payments would end, but this roughly $1.2 trillion in accumulated private property would keep growing. These nest eggs would help finance each owner's retirement benefits.
While this would generate real wealth for working Americans, Democrats remain unsatisfied. Like a 21st Century Bonnie and Clyde, House Democratic leader Nancy Pelosi of California and Senate Democratic chief Harry Reid of Nevada seem comfortable with Congress' annual Trust Fund heist.
"There's nothing wrong with Social Security lending money with the prospect of returning it," Pelosi told Congress Daily. Reid called DeMint-Ryan "a transparent political gimmick."
Bush should push to "stop the raid and start the accounts," as this idea's supporters chant. As for Bush's opponents, "Democrats claim they only want to spend Social Security funds on Social Security," DeMint said June 22. "Let's see if the party of 'no' can say 'no' to stopping the raid on Social Security."
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a senior fellow with the Atlas Economic Research Foundation in Fairfax, Va.
E-mail him at deroy.murdock(at)gmail.com