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Guest Commentary: June 12, 2001
Saving Social Security
The Honorable Nick Smith
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Yesterday the President's Social Security commission met for the first time. Last night I stayed up quite late listening to, 10 or 12 of those commission members talk and speak about what they saw as their challenge to try to fix the Social Security problem. I was disappointed, number one, that some of the commissioners apparently were not in attendance; number two, I was disappointed that some of the commissioners appeared not to understand the complexity of the problem facing Social Security and, therefore, facing America.
Social Security is probably one of our most successful programs to help retirees. We are faced with the challenge of keeping Social Security solvent. What I would like to stress is what I displayed on this first chart, and that is the biggest risk is doing nothing at all. Some of the commissioners I heard suggested the dangers of investing and do not risk Social Security. The problem is that if we do not do something, then we are going to end up increasing payroll taxes and probably also reducing benefits.
The challenge is ahead of us. Social Security has a total unfunded liability of over $9 trillion. That means we would have to put $9 trillion today in an investment account, earning at least 2.7 percent interest to accommodate future payments in Social Security. The Social Security Trust Fund contains nothing but IOUs. This is an issue often overlooked when people suggest, look, the problem is not really going to confront us until 2035 or 2036 or 2037 because the trust fund owes Social Security some of that money. The problem is where are we going to come up with those funds 15 years from now, maybe as soon as 12 years from now when there is less Federal payroll tax revenues coming in for Social Security than is needed to pay the promised benefits? That is the challenge.
And that is the point; if we continue to put off this decision, on what I consider the largest financial challenge of this country, we are going to end up with doing a disservice not only to workers by increasing the payroll tax that they pay but also for retirees as future Congresses look to reduce those particular benefits. This will be a huge burden on our kids and our grandkids that this Congress should not abide.
I compliment the President for moving ahead to develop a solution. One of the challenges of the Social Security commission is going to be to inform the American people of the seriousness of this current problem and the fact that the longer we put off a solution the more drastic that solution must be. To keep paying promised Social Security benefits, the payroll tax will have to be increased by nearly 50 percent or benefits will have to be cut by 30 percent.
Because we have increased social security taxes so much, by waiting too long for the last Social Security commission in 1983 we have a temporary blip of more money coming in from the Social Security tax than is required to pay benefits. That surplus is going to be depleted someplace between 2011 and 2016, and then we go into deficit spending.
I mentioned $9 trillion that we need today to put in an investment account to keep Social Security solvent, if you use tomorrow's dollars, what we will need in future dollars over the next 75 years is $120 trillion to pay benefits, $120 trillion more than is going to be raised by the current Social Security tax. A serious problem.
I urge these commissioners to attend the meetings. I urge these commissioners not to send staff, but to understand what the Social Security problem is and to give it their all to come up with a reasonable solution.
Personal Retirement Accounts
They do not come out of Social Security. They become part of the Social Security retirement benefits. A worker will own his or her own retirement account, and it is limited to safe investments that will earn more than the 1.7, percent that is going to be paid by Social Security as a return in the form of benefits on the taxes that the employer and the employee paid in.
And just a final comment. Seventy-five percent of American workers today pay more into Social Security tax than they do into income tax. Again raising taxes should not be an option.
Note: This column has been adapted from a speech Rep. Smith delivered on the floor of the House, June 12, 2001.
 How to contact Rep. Nick Smith (R-MI)
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