Social Security Reform:
The Thrift Savings Way
By Ted Abram
For decades, one free-spending Congress after another has raided the trust fund that supports Social Security in order to spend money in other areas. More than $2 trillion that should have been saved for future retirees instead has been used to fund years of profligate spending by politicians from both parties.
In just 10 years’ time, the Social Security system will begin to pay more each year in benefits than it receives in tax revenues. Thanks to Congress, there will be no money in the trust fund to help meet the shortfall.
However, an empty trust fund is just the beginning of Social Security’s problems. According to the Social Security Administration, there were 3.3 workers supporting each beneficiary in 2006. The rapid aging of our population means that by 2030 just 2.2 workers will be available to support each retiree.
America is truly facing a fiscal and retirement security crisis. Current projections show a $13 trillion gap between the benefits we have promised to future retirees and what the program will actually collect in taxes. To put that number in perspective, it’s the same cost as everything every person in the whole country purchased for the entire 2006 calendar year.
We can close some of this shortfall by raising taxes on the programas Congress has done more than 20 times beforeor by cutting promised benefits. But these actions will only make Social Security an even worse deal for today’s workers. What is most disturbing is that even these changes will not protect American workers from having their benefits raided by future big-spending Congresses.
There is a better way to go. Every federal employee in America, from mail carriers to members of Congress, has access to what is called a “thrift savings plan.” This retirement account functions very much like the 401(k) accounts that are replacing many traditional pension plans in corporate America.
Federal workers have a choice about putting in their money. They also have a choice in how that money is invested. When they retire, they own those assets and can even pass them on to their children after they die.
It’s a great system for retirement. I believe it is time to give every worker in America the same opportunity that federal workers have, rather than slapping yet another band-aid on an antiquated Social Security system that no longer works.
True reform of Social Security will allow American workers to create and fund their own protected retirement accounts with money that can never be taken away from them. These accounts can be funded by a portion of our payroll taxes and will contain low-risk investments that grow with the economy, providing seniors with a secure retirement income and breaking us free of the Social Security death spiral.
A similar fix is available for Medicare, which is actually in even worse financial shape than Social Security. By expanding the current system of Health Savings Accounts, we can give workers a portable, tax-free way to save for future medical expenses.
We still have a window of opportunity to help both current and future retirees. Protected retirement accounts will fix the broken Social Security system, take our money out of the hands of Washington politicians and keep it where it belongsbut the time to act is now.
Ted Abram is Executive Director of The American Institute for Full Employment.