- The Washington Times - Saturday, January 1, 2005

No issue in America is more contentious than how to address the impending insolvency of the Social Security System, the largest and most popular government program.

Our system started in the 1930s and is modeled on a plan from Otto von Bismarck’s Germany of the 1880s. Social Security’s failure stems from its pay-as-you-go feature, in which payroll taxes are never saved or invested for a particular taxpayer’s retirement. Our retirement system is designed without savings.

Changing demographics make this system unsustainable. Pay-as-you-go works when there is a 16-1 ratio of workers to retirees, as in the 1950s. Today there are about 3.3 workers per retiree. In 20 years, we will have only 2 workers per retiree. The current system is not sustainable.

Even if the system could make the payments, workers today can expect a return of less than 2 percent on payroll taxes. The Supreme Court has ruled workers have no legal right to benefits. So Americans are at the mercy of politicians regarding the benefits they receive for their payments.

We can design a better system. Current payroll taxes are 12.4 percent of wages. Putting a portion of these payments into Personal Retirement Accounts (PRAs) is the answer.

With PRAs, every worker is a saver. This would increase national savings, productivity, wages and our economic strength. Each worker would be a stakeholder in this growing economy.

The wealthy already have savings and investment accounts, But lower- and average-income workers, after paying payroll taxes, mortgage or rent and putting food on the table haven’t any money left. They must put almost all their retirement savings into a program with a poor return.

Today’s workers deserve the same security their grandparents had. People retiring in 2035 shouldn’t have to be in the retirement system modeled in the 1880s or created in the 1930s. It is time to modernize. We need a system in which we can own and control our retirement assets, without big corporate or government control.

The assets in these accounts will compound and create real wealth. PRAs give American workers dignity and a sound retirement — a true lockbox politicians can’t touch.

This new year is the time to tackle the issue. Every two years’ delay will increase reform costs $320 billion. It will be expensive to move to a funded system, but it will cost 10 times more to prop up the current bankrupt system. The goal is a sound retirement system for every generation designed with real savings.

BOB COSTELLO

President

SocialSecurityChoice.org

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