A Simple Program, A Complex Problem
It was back in the 1930s when the Social Security Act was born. It offered financial hope for the future as Americans struggled through the Great Depression. The concept was pretty simple: workers would pay a Social Security tax, and when they retired they would get monthly checks to support them in their old age. Today, many economic experts say Social Security will be in trouble in the years ahead and those promised benefits may need to be cut back, or even eliminated. So what is the problem?

NEWS ANALYSIS

A Plan to Guarantee Benefits to Future Generations

September 9, 2004

CBN.com – Congressman Paul Ryan (R-WI) is currently serving his third term as a member of Congress. Since entering Congress, Ryan has been fighting to make Social Security and Medicare solvent for future generations, while protecting current seniors’ benefits. Rep. Ryan recently discussed his plan to salvage Social Security with Pat Robertson on the 700 Club.

PAT ROBERTSON: Joining us now from Washington is Congressman Paul Ryan. He's introduced a bill that has a plan to fix Social Security's financial problems. Congressman, it's a pleasure to have you with us.

REP. PAUL RYAN: It's a pleasure to be with you, Dr. Robertson.

ROBERTSON: I read your excellent article in the Wall Street Journal, and I was thinking back to 1988 when I made a run for the presidency, and I remembered every single opponent I had in the Republican primary, with the exception of Governor Pete DuPont (former Delaware governor) demagogued the issues -- it was the third rail.

RYAN: You did well in Iowa with this.

ROBERTSON: I did indeed. Tell me, how do you get past this fear of politicians, that you touch the system and everybody votes against you?

RYAN: Well, I am hugging the third rail going into this election cycle. I represent a swing state of Wisconsin and I have spent the month of August talking to people about Social Security. I believe that people are ready for this. Number one, Social Security is going bankrupt. We can either endlessly borrow more money to keep the program going, raise FICA (Federal Insurance Contributions Act) 20 percentage points if we are going to use taxes to make it solvent, or cut benefits 40 percent, or grow the rate of return coming into Social Security. The best way to do that is to give individuals ownership over their own retirement accounts by establishing personal retirement accounts.

ROBERTSON: The seniors always say it is mine, and you can't take my money away from me. How do you answer them?

RYAN: Well, what my proposal does is it guarantees the benefits for all seniors. We don't cut benefits or raise taxes. What our proposal does, for people under the age of 55, they have an option of dedicating about half of their payroll taxes, about 6.4 percent of their 12.4 percent payroll taxes into their own personal retirement account, which will be managed just like a federal thrift savings plan. What this program does, because it has now been scored by the chief actuary of Social Security, is it actually brings Social Security into permanent solvency. It not only guarantees benefits for today's seniors, which we can't pay in 15 years. But it guarantees benefits for future seniors, and it gives younger workers an option of taking roughly half of their payroll taxes and putting it into their own account where they own their own retirement nest egg.

ROBERTSON: The president is into that, with that ownership society. He's on board for this program, isn't he?

RYAN: Yes. I was very encouraged with his speech (at Republican National Convention). This is the nucleus of his ownership society agenda that he laid out, that he wants to impose over the next four years of his hopefully reelected administration.

ROBERTSON: You have the existing retirees and Baby Boomers coming into retirement. How do you take care of them during this transition? You are going to pull, for the younger workers, half of their money to go into private accounts. How do you fund the balance?

RYAN: Two things. Number one, Social Security now gives you such a bad rate of return on your money -- about one percent -- and the improved rate of return is what brings Social Security into solvency. Because the benefit obligations are largely paid out of your personal retirement account. To bridge that financing gap, what we propose in my legislation, is, let's grow the non-Social Security part of the government at an average rate of 3.6 percent for eight years, rather than the current projection of 4.6 percent for eight years, and transfer the balance of that savings to finance Social Security. Let's put that into perspective. During Bill Clinton's presidency, he grew the government at an average annual rate of 2.6 percent. So grow government at a percentage point faster than Clinton grew it, and at a percentage point slower than we are growing it, and use those savings largely to transition over to a solvent Social Security System. What I am trying to do is two things -- build a constituency for containing the growth of federal government. And recognizing the fact that the Social Security Trust Fund has been raided by the general fund since 1968. It's high time that we stopped raiding the Social Security Trust Fund; dedicate all FICA taxes to Social Security, and reverse that flow of money so that we put money back into Social Security that was taken out of it for the last 30 years.

ROBERTSON: That is kind of the dirty secret, isn't it, that there really is no trust fund? It is all IOU's.

RYAN: That's right. There is no money in the trust fund right now. The other problem with Social Security today is, the only promise of benefits anybody has is a politician's promise and whatever Congress chooses to give you in any given year. With a personal retirement account, it is your own private property. You can will it to your kid or spouse. It moves with you and it is your property, and the government cannot take it away from you. And more important than that, through personal retirement accounts, you will get better retirement benefits than what Social Security gives you today, let alone what Social Security can pay.

ROBERTSON: Will this ultimately move the whole thing private, or will people have a choice of going either way?

RYAN: With my bill, people have a choice. You can stay in the current system today and keep those benefits -- we're not going to cut those benefits -- or you can choose, if you are 54 or below, to have this personal retirement account option. We back up these accounts with a safety net that gives you at least what you would have otherwise gotten if you stayed in traditional Social Security. And if you choose these personal accounts -- let's say you are 34 like I am, and you've been paying into it for a number of years -- when you retire, you will get benefits based on the taxes you have already paid, in addition to the money you accumulate in your account. That's how our program works.

ROBERTSON: Were you trained in finance? It's a great program.

RYAN: Yes, I was trained in finance and economics

ROBERTSON: It shows. Can you get a majority together of your colleagues to vote for this? It's a wonderful program.

RYAN: We are sure working on that. My counterpart in the Senate is John Sununu from New Hampshire, who is introducing it this week. We are trying to get the debate going in this election year when voters are paying attention. There is a crowd out there that wants Social Security to be a collectivist system where the government controls your retirement, and who wants to tell you that nothing's happening, to not worry, it's not a problem. But look at what the trustees are saying, the Alan Greenspans are saying. Social Security is going bankrupt. The sooner we act, the better it is. The more we procrastinate, the uglier the options are. We want to get the country educated as to the consequences of not acting and the benefits of reform.

ROBERTSON: Representative Ryan, thank you so much.

RYAN: Thank you very much.

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