Social Security Reform

THE NATURAL LAW PARTY envisions an America where our precious elderly, who have made invaluable contributions to our nation during their working years, enjoy economic security and growing fulfillment in their retirement years. We must care for and nourish our senior citizens, and we must protect our disabled workers and their dependents who depend on Social Security. At the same time, the Natural Law Party also supports fiscal responsibility and a balanced federal budget. These two goals -- security for the elderly and economic responsibility -- may seem contradictory. However, the fulfillment of both objectives can be achieved in a just and caring manner through an innovative, responsible, and comprehensive approach to Social Security reform.

THE PROBLEM

Social Security is America's most expensive government program [1]. In 1998, Social Security accounted for $384.3 billion of the $1.69 trillion federal budget. By 2002, spending is expected to reach over $463 billion. Yet this program is essential because it covers 44 million citizens, and it has reduced the number of senior households that are below the poverty line from 50% to less than 13%.

Unfortunately, Social Security is heading for bankruptcy. Eighty-eight percent of Americans believe that Social Security is in big trouble now, or will be in the near future -- 60% under the age of 65 believe Social Security will not exist when they retire. Without reform, bankruptcy is inevitable because of decreasing birth rates, higher proportions of senior citizens, and increased longevity.

Congress clouds the problem. The so-called Social Security Trust Fund is currently just another tax -- not an investment vehicle for retirement, but a conduit through which massive amounts of payroll taxes are redistributed to retirees and other beneficiaries each month. This pay-as-you-go system is unsustainable. In 1950, there were 17 workers paying into the Social Security system for every person receiving benefits. By 2010, there will be only 2 workers paying into the system for each beneficiary [2]. In 2015, the Social Security Administration will be paying more to retirees than it collects from workers. As the Baby Boomers begin retiring, Social Security payments will grow exponentially [3], forcing Social Security into bankruptcy.

The problem is that our payroll taxes, which go into the Social Security Trust Fund, are not invested or saved; this fund is a political fiction. For decades Congress has used the fund to disguise the actual size of the federal deficit, " borrowing" surplus Social Security revenues (over $160 billion in 1998) to pay the operating expenses of other areas of the government. This diversion of Social Security taxes helped to produce the recent "budget surplus". However, this surplus is false -- which could be seen as an unfair, and even illegal, theft from the future retirement incomes of our senior citizens.

Our government hides this problem by inaccurately reporting the impact of Social Security on our national debt and economy. If the U.S. were required to account for Social Security, as private businesses do for their pension liabilities, the national debt would be approximately $16 trillion, rather than the reported $5.9 trillion [3]. At current interest rates, that future level of national debt will require Americans to pay almost $720 billion annually in interest, which is almost half the 1998 federal budget. If changes are delayed, Congress will be forced to increase Social Security taxes to confiscatory levels, restrict eligibility, and cut already modest benefits. These options are undesirable, but they can easily be avoided with effective planning and action.

Furthermore, Social Security is unfair to everyone -- rich, middle-class, and poor. In the past, many people collected much more than they paid into the system. However, the average wage earner who retires in 1999 will get back less than 80% of the taxes he or she paid into Social Security [4]. In the future, most people will receive progressively smaller proportions of what they have paid. Social Security regulations also discourage post-retirement employment, even though many senior citizens need extra income to survive and many are willing and capable of continuing to work.

Although Social Security reform has been traditionally ignored by Republicans and Democrats, reform of this system is necessary and inevitable. Innovative reform proposals have been recently presented by many organizations and by a few brave Members of Congress, including Senators Bob Kerry of Nebraska and Daniel Moynihan of New York. Yet the two major parties have been unable to pass substantive reform.

THE SOLUTION

The Natural Law Party boldly meets this issue head-on, seeking to protect our elderly economically in their retirement years today while maintaining the viability of the Social Security System for future generations.

We recommend privatization of one half of the Social Security system. Under our plan, the workers’ personal contributions to Social Security payroll taxes (approximately 50%) would be privatized -- placed in mandatory retirement investment accounts that the workers themselves control. Each worker would thus have his or her own personal retirement account, which could include both private sector investments (e.g., stocks and bonds) and government securities.

The employer’s contribution to Social Security payroll taxes (50%) would continue to fund a socialized Social Security safety net for the retired and the disabled. Benefits from these employer contributions would be distributed equally among all retirees and other Social Security beneficiaries. These employer-funded Social Security payments would also include private sector investments in stocks and bonds. Historically, the stock market has provided returns two to four times higher in the long term than those from government securities [4]. Such private sector investments would stimulate strong economic growth by providing a substantial pool of investment capital through the $558 billion collected in Social Security taxes each year [5]. Privatization of government pension plans has worked well in other nations such as Chile, where retirement incomes after privatization increased 40% to 50% over previous public plans. Polls indicate that approximately two thirds of voters support privatization of Social Security, with more than three quarters of younger voters supporting privatization.

There are several excellent ways of accomplishing this goal responsibly and compassionately [4-6]. The Natural Law Party's plan would