Senior members of the House Ways and Means Committee, its chairman and the entire House leadership, along with a dozen senators recently announced their intention to introduce legislation to stop the raid on Social Security surpluses and begin saving them in personal accounts for workers' retirements. What a huge achievement for the GOP, and what an important victory for President Bush, who wants to further democratize our capitalistic economy.
This legislative breakthrough is an even greater victory for the nearly 160 million Americans who pay Social Security taxes, especially low- and moderate-income workers who currently find it difficult to impossible to save, build wealth and get access to capital after paying the crushing payroll tax burden that takes 12.5 percent of every dollar they earn. If the Social Security surplus and the interest due the trust fund were placed in personal retirement accounts, workers would enjoy accounts equal to about one-third of the payroll taxes they currently pay. For a $50,000-a-year earner, that's almost $2,000 a year; for a $30,000 earner, that's more than $1,100.
Workers finally will be able to save and invest some of their hard-earned wages in retirement accounts they own and control instead of Congress spending them on unrelated programs. More importantly, workers will start to earn a fair rate of return on their Social Security dollars and enjoy higher retirement benefits. The current system will pay today's average worker as little as 1 percent or 2 percent. Many workers receive a negative real rate of return.
Personal retirement accounts offer a better deal for workers - higher benefits, greater security and the guarantee that no politician can take those benefits away.
The new approach, which is a pure personal accounts bill - no tax increases, no benefit cuts, no hikes in the retirement age - is the key to the ownership society that Bush - and before him President Clinton and British Prime Minister Margaret Thatcher - long promoted. Britain also allows its workers to place part of their retirement taxes into personal accounts.
Bush understands that allowing workers to own assets and build wealth in personal retirement accounts would give all American workers a stake in the American economy, a stake in the taxation of capital and business activity, an interest in controlling the growth of federal spending and in larger civil society generally.