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Information in this section:
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The President's Plan to Dismantle Social
Security
In 2004 the President announced a plan to fundamentally change the
Social Security Program. His plan calls for massive benefit cuts for all
Social Security retirees in order to set up a risky privatization scheme
that could jeopardize senior's financial security. Senator Leahy
supports working in a bipartisan fashion to develop a plan to strengthen
Social Security, without relying on huge benefit cuts for the middle
class. The first step in any reform of Social Security should be
to do no harm to the program. If the President is serious about
shoring up Social Security he should remove his privatization plan from
the table and offer to move forward on a bipartisan basis.
Details of the President's Plan
The President's plan is commonly referred
to as "Progressive Price-Indexing," because it changes the law by tying
retirees’ benefits to price inflation instead of wage growth.
Historically, prices rise more slowly than wages, and therefore this
plan would drastically cut benefits for future retirees. The plan
is often called “progressive” because low income retirees would be
protected and the cuts would fall most heavily on people in the middle
class.
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People who are 25 years old now and retire
with average career earnings of $59,000 a year will have their
benefits cut by 24 percent compared to what they are promised
under the current system.
·
People who are born five years from now and
retire with average career earnings of $59,000 a year will have
their benefits cut by 42 percent compared to what they are
promised under the current system.
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People who are born five years from now and retire
with average career earnings of $36,000 a year will have their
benefits cut by 28 percent compared to what they are promised
under the current system.
The Cost of Private Accounts
The President has said that private accounts must be part of any
proposal to reform Social Security. Establishing these accounts
would divert money away from the guaranteed benefits provided under
today's system, and would cost roughly $5 billion. To help pay for
the cost, the President's Plan would call for increasing the national
debt and significant cuts to retiree benefits. Despite stating
that these accounts would be optional, the massive benefit cuts that
would be used to pay for them would impact all retirees, not just those
that have chosen to set up a private account. Of additional
concern is how these cuts would impact people with disabilities and
widows who collect Social Security. While the President has said
that these groups would not be adversely harmed by reform, it is unclear
how these benefits would not be jeopardized unless the disability
programs were removed from Social Security.
Alternatives to Privatization
There are a number of good ideas on how to reform Social
Security that do not include plans for privatization or dramatic benefit
cuts. The
President himself has said that privatization would not solve the long
term funding imbalance that Social Security faces. Many experts on
Social Security have proposed increasing the taxable earnings base,
ensuring that more earnings are taxable, as well as to eliminate the
base altogether, ensuring that all earnings are taxable. Other
proposals call for including all new state and local employees in Social
Security. While all Federal Employees and Members of Congress pay
into Social Security, some states and local governments have alternative
retirement plans for their employees. These and other proposals
should be carefully considered in a bipartisan fashion, before any
reform proposal is rushed through Congress.
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