GOP Offers 2 Options to Save Social Security

House Republicans outlined two different plans Thursday to ensure the survival of Social Security over the next 75 years. Both allow younger workers to invest some wages in personal retirement accounts.

The bills came two days after President Bush’s Social Security commission offered three proposals for private accounts among its recommendations for the future of the retiree benefit program. The commission suggested Congress take at least a year to discuss the options before taking action to revamp the 66-year-old system.

The two bills’ sponsors said it was not too early to get the legislative process started.

Rep. E. Clay Shaw Jr. (R-Fla.), chairman of the Ways and Means subcommittee on Social Security, said the difficulty of moving Social Security legislation in an election year did not deter him. “If I see the opportunity to move a bill forward, I will.”

Added Rep. James DeMint (R-S.C.): “It’s going to be an election issue whether we like it or not.” DeMint is co-sponsoring the second bill with House Majority Leader Dick Armey (R-Texas).

Shaw’s measure would create a voluntary program under which workers could receive a refundable tax credit of 2% to 3% of their earnings that would go into a personal retirement account. Employees could pick from a range of investment houses that would put 60% of the investment in stocks and 40% in corporate bonds.

The assets in the accounts would grow tax-free, with no withdrawals permitted until a worker starts receiving benefits. Upon retirement, the worker receives 5% of the account balance in a lump sum.

DeMint would allow workers to dedicate a part of their incomes--from 8% for people in the lowest income bracket to 3% for those earning at least $80,000--to a personal account. That account would be funded from the current 12.4% Social Security payroll tax.

Shaw gave out a letter from the Social Security Administration’s chief actuary predicting universal participation because people would be guaranteed the basic Social Security benefit plus the 5% lump sum payment upon retirement.

Both Shaw and DeMint said they could save the system without increasing payroll taxes, reducing benefits or raising retirement ages.

Shaw said his plan would cost $3.6 trillion over the next 75 years. Transition costs would even out by about 2036, and all borrowed money would be paid back with interest over 75 years.

“It’s going to come from red ink,” he said of the costs to get the program running. “I don’t apologize for that.”

DeMint said the system would start running surpluses in 2055, and that over the 75 years it would save Social Security $15 trillion in benefit payments.

Most Democrats oppose reliance on private investments for Social Security benefits, pointing to the recent downturn in the stock market as proof of the riskiness of such a venture. Democrats also pointed out that, according to the Social Security actuary, Shaw’s plan would increase the national debt by $8 trillion over the next 50 years.