On September 12, the pioneering Rep. Thaddeus McCotter introduced trailblazing legislation
providing workers the freedom to choose personal savings and investment accounts to finance
half of their future Social Security benefits. This legislation would completely solve the future
Social Security financing problem, without cutting benefits or raising taxes, as officially scored
by the Chief Actuary of Social Security.
Indeed, because standard, long-term market investment returns are so much higher than what
Social Security even promises, workers with personal accounts will enjoy higher rather than
lower benefits. Moreover, the legislation would result in the greatest reduction in government
spending in world history, as explained below.
Why Social Security Is Fundamentally Broken
Next year the Baby Boom begins to retire on Medicare in earnest, and the year after that on
Social Security. For decades now, the federal government's own official reports have been
showing that Social Security would not be able to pay all promised benefits to the baby boom
without dramatic, unsustainable tax increases.
Last year, Social Security began running a cash deficit, for the first time since President
Reagan saved the program in 1983. Under what the government's actuaries call intermediate
assumptions, those deficits will continue until the Social Security trust funds run out of funds
to pay promised benefits by 2037. After that, paying all promised Social Security and Medicare
benefits financed by the payroll tax will require eventually almost doubling that tax from 15.3
percent today to nearly 30 percent.
Under what the government's actuaries call pessimistic assumptions, the Social Security trust
funds will run out of funds to pay promised benefits by 2029. After that, paying all promised
benefits to today's young workers would eventually require raising the total payroll tax rate to 44
percent, three times current levels, and ultimately more.