SSA's official score shows that because so much of Social Security's benefit obligations eventually are shifted to personal accounts, the long-term Social Security deficit is eliminated completely without benefit cuts or tax increases. And even though the proposal temporarily borrows money to pay some of the transition costs (i.e., those current benefits left uncovered when part of the payroll tax is dedicated to personal accounts), it also produces the largest-ever permanent reduction in government debt. Over time the system completely eliminates the $10.5 trillion unfunded liability of Social Security.
The short-term transition deficits, created by workers shifting just over half of total payroll taxes into the accounts, is covered by four factors: 1) the short-term Social Security surpluses until 2018; 2) the funds obtained by reducing the rate of growth of federal spending by 1 percentage point a year for just eight years; 3) the increased revenues that would result from higher corporate investment and earnings utilizing the increased savings in the accounts; and 4) the temporary sale of Social Security trust-fund bonds during the transition to cover any remaining annual net deficit.
With this transition financing, Social Security achieves permanent surplus by 2029, and then within the next 15 years, all of the trust-fund bonds can be completely paid off. The Social Security trust funds would never fall below $1.38 trillion, or 145 percent of one year's expenditures, with the official standard of solvency being 100 percent.
As we just learned with Medicare, however, the devil will be in the details of getting such a program through the Congress. The devil in this case is a zero-sum mindset among many members of Congress from both parties who believe to their very core that Social Security reform is fundamentally about cutting future benefits for retirees and raising payroll taxes on workers.
The SSA report completely debunks this fallacy and demonstrates conclusively why it is unnecessary even to contemplate reducing future Social Security benefits or raising payroll taxes and why all the hand-wringing over borrowing money to finance the transition is misplaced. Indeed, through the personal accounts workers across the board would get higher benefits than Social Security now promises, and because the reform ultimately starts producing large trust-fund surpluses, workers eventually will pay lower payroll taxes.
Publication of the Social Security Administration report makes it official: We can create a shareholder democracy for the 21st century in which every working man and woman not only has a vote but also owns property, where each citizen can look forward not just to retirement security but retirement prosperity. A new, personal-accounts-based Social Security system that doesn't skimp on how much of their payroll taxes workers can invest would promote individual wealth creation and ownership, and it would allow each American - especially women, the poor and minorities - to participate in America's economic success.
Members of Congress, are you listening?