No pain, no savings on Social Security

[question everything]

No pain, no savings on Social Security

By Gene Sperling
January 6, 2005

If President Bush truly wants a bipartisan agreement on Social Security reform, he should recognize that he can keep the system solvent, increase savings and promote his ownership agenda without dividing Washington by carving Social Security into private accounts.

The president can promote the individual ownership he wants and protect the guaranteed Social Security benefits Democrats insist on with a new universal 401(k) that offers all Americans a private retirement account in addition to Social Security, and uses government funds to match contributions made by moderate and lower-income workers.

(snip)

Allowing people to invest some of their Social Security payroll taxes in the market simply adds risk to the one risk-free leg of the retirement stool. If instead people could invest in universal 401(k) accounts – in addition to Social Security – that provided new incentives to those families having the hardest time putting money away, America would actually leverage new savings, not just shift existing savings around.

Such accounts would also help remedy America's upside-down tax incentives for retirement savings. Taxpayers in the highest income bracket, 35 percent, not only are more likely to get a matching contribution for their savings from a 401(k) at work, but also get to deduct 35 cents from their taxes for each dollar saved in their 401(k). Meanwhile, most working families in the 15 percent bracket do not get matching contributions from an employer-sponsored pension – and when they do save they get only a 15-cent deduction for each dollar.

(snip)

The president should propose a 3 percent surcharge on all income over $200,000 – whether from earnings, dividends or capital gains – and use the money to increase national savings now and help keep Social Security solvent. He could make the deal contingent on a bipartisan agreement to find equivalent savings to shore up Social Security through measured revenue and benefit changes.

(snip)


Find this article at:
http://www.signonsandiego.com/uniontrib/20050106/news_lz1e6sperling.html

Sperling, a senior fellow at the Center for American Progress, was national economic adviser to President Bill Clinton from 1997 to 2001.