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March 17, 2000
Grams unveils hisSocial Security planBy GUY PRIEL Journal Staff Writer NEW ULM -- With election-year politics heating up nationwide, at the heart of the issue is the future of the Social Security System and how to reform it while protecting senior citizens currently enrolled. "There are a couple of plans being discussed now," U.S. Senator Rod Grams, R-Minn., said during a town hall meeting Thursday night at New Ulm High School. "The plan I have introduced is more comprehensive and will develop a new system for Social Security." Under the current system, which was designed as a pay-as-you-go type of system, Social Security will be strained to the limits within 30 years because people are living longer and the average retirement age is increasing, he said. "When Roosevelt created the system it was supposed to contain a private sector component," he said. "That was the big lie of Social Security. It is supposed to be one leg of a three-legged stool which includes personal savings and private pension plans." The current system will be stretched to its limits because there will be 78 million baby boomers reaching retirement age by 2008; the current trust fund will go broke by 2033; and spending will exceed tax revenues by 2014, Grams said. "There is no account in Washington with your name and the money you have paid into Social Security," he said. "That is how the pay-as-you-go system works. The money is spent on other federal programs. The trust fund consists of I.O.U.s" In 1940, there were 100 workers paying benefits to support one retiree. Currently there are two and a half workers paying benefits to support each retiree. That will drop to less than two workers by 2025. Payroll taxes make up 15.3 percent of a person's income, and during the past few years, the president has taken a bite out of Social Security, Grams said. He proposed a lockbox that would save approximately $1.9 trillion worth of Social Security funding from being borrowed. "I have also introduced a Social Security Protection Act," Grams said. "This will reduce non-entitlement spending while protecting seniors currently enrolled in the existing program. Essentially, it reduces spending to save Social Security borrowing." Grams has been working on his proposal for the past six years. He believes there is support from many in Congress for the proposed package. Under his proposal, there will be protection for beneficiaries; freedom of choice; a safety net; a fully-funded system that avoids a tax increase and makes Americans better off. "The big thing this year is that you can't get reelected unless you are willing to talk about Social Security," Grams said. Under the plan, there is a proposal known as the Personal Security and Wealth In Retirement Act. This allows working Americans the opportunity to set aside 10 percent of their income into personal accounts that are managed by government-approved investment companies. Americans currently pay 12.4 percent of their income into the system. If the new proposal passes, 10 percent would be invested, while 2.4 percent would be used to support current beneficiaries, Grams said. "There is also a component called recognition bonds," Grams said. "Workers should receive whatever was paid into the system. If anything is done to the existing system, there will still need to be a system in place to provide benefits to those already in it. That is a promise made by the federal government." The federal poverty rate is set at $8,240, and no worker should receive less than $12,400, or 150 percent of the poverty rate. Under Grams' plan, anyone not receiving at least $12,400 would receive extra money from the government to make up the difference. "The rules that apply to Individual Retirement Accounts will also apply to the Personal Retirement Accounts, and a federal board will be established to oversee the accounts," Grams said. "The benefit is that you decide when you want to retire and when you want to withdraw your benefits. This will provide more choice for families." The personal accounts will be considered community property and would be distributed to heirs without any extra taxes being attached, he said. "Retirement income will be there for everyone," he said. "If you were to ask people, 70 percent of all Americans would prefer this type of system to Social Security." There is a safety net built into the plan, because of the additional funding that would be taken out to support those on the system already and the government would be forced to rely on other assets to guarantee the funding. "The biggest risk with Social security is to do nothing," Grams said. "Many opponents say it is risky, like the lottery. We need to make sacrifices if we are committed to this." Galveston County, Texas, opted out of Social Security for all county employees in 1980 and established personal retirement accounts for them beginning in 1981, but Congress closed the door on that option immediately, Grams said. "It has been a success for them, it can be a success for everyone else as well," he said.
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