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News Wednesday, Oct 10 2012

BRIDGE BRIEFING: Ryan And Social Security

Oct 10, 2012

Ryan Said Social Security Privatization Was Not Necessary, But He Preferred It Personally. According to a transcript of “The Charlie Rose Show,” Ryan was asked, “When you look at that Social Security for a moment, do you think it’s necessary to reform Social Security with private accounts?” Ryan responded, “No, it’s not necessary. I personally prefer it because, look at me, for example. I’m 40 years old. I’ll about a one percent return on my payroll taxes if Social Security could pay me my benefit, which, of course, it can’t… It’s not privatized. It’s managed by the government in safe index funds. It harnesses the power of compound interest so they grow their money at five percent or six percent per year instead of negative one percent. They get better benefits. It’s a nest egg they control that goes to their property.” [PBS, “The Charlie Rose Show,” 11/15/10]

Ryan’s 2010 Budget Plan Sought To Partially Privatize Social Security

Ryan’s Roadmap For America’s Future Privatized “Some Of” Social Security While Lowering Income And Estate Taxes. According to The Christian Science Monitor, “Rep. Paul Ryan of Wisconsin, senior Republican on the House Budget Committee, has laid out a 99-page ‘Roadmap for America’s Future.’ Among other things, it would reduce personal income taxes, end the corporate income tax and the estate tax, and privatize some of Social Security. Critics say it ‘calls for radical policy changes that would result in a massive transfer of resources from the broad majority of Americans to the nation’s wealthiest individuals.’” [The Christian Science Monitor, 9/5/10]

The 2010 Ryan Plan Would Have Allowed Workers To Invest 40% Of Payroll Taxes In Personal Retirement Accounts

In 2010, Ryan Budget Proposal Included Plan To Privatize Social Security And Allow Workers To Invest 40 Percent Of Payroll Taxes In Personal Retirement Accounts. According to CNN Money, “After legislation he co-sponsored in 2005 went nowhere, Ryan included a detailed plan to privatize Social Security in his budget proposal in 2010. Under that plan, he would allow workers to funnel an average of roughly 40% of their payroll taxes into personal retirement accounts. The thinking is that people would gain control over a portion of their retirement savings and be able to build bigger nest eggs by investing in stocks. Another plus: They could pass the accounts along to heirs. .. His budget plan unveiled in 2010 called for allowing Americans to open private accounts starting this year. ‘Due to the higher rate of return received by investments in secure funds consisting of equities and bonds, these accounts would allow workers to build a significant nest egg for retirement that far exceeds what the current program can provide,’ he wrote in the proposal.” [CNN, 8/14/12]

Ryan’s Later Budget Proposals Did Not Include The Plan, Instead Supporting Raising The Retirement Age And Reducing Benefits For Wealthy Retirees. According to CNN Money, “…neither Ryan nor Romney have said much about private Social Security accounts lately. Ryan dropped it from his more recent budget proposals, while Romney doesn’t mention it on his campaign Web site… In the budgets he proposed this year and last, he now cites ideas put forth by the President Obama’s bipartisan fiscal commission, on which he served, that would strength Social Security. These include raising the retirement age and reducing benefits for wealthier retirees.” [CNN, 8/14/12]

Retirees Would Have Lost Thousands In The 2008 Crash While Financial Management Firms Stood To Make Trillions

Center For American Progress: Typical Retiree Would Have Lost $26,000 During October 2008 Crash Under A Bush-Style Private Social Security Account. “Bush-style private accounts for a 2008 retiree would have yielded negative returns in the U.S. market. A person with a private Social Security account similar to what President George W. Bush proposed in 2005 that was invested in stocks retiring on October 1, 2008 after saving for 35 years (since 1973), would have seen a negative return on their account—an effective -0.6 percent net annual real rate of  return—and lost $26,000 on the market.” [“Your Future On The Market,” Center for American Progress Action Fund, October 2008]

Private Financial Management Companies Could Receive Almost A Trillion Dollars Under Some Plans To Privatize Social Security. According to a September 2004 article by then-University of Chicago professor Austan Goolsbee, “Creating individual accounts in the social security system would lead to a massive increase in payments of financial fees to private financial management companies. Under Plan II of the President’s Commission to Strengthen Social Security (CSSS), the net present value of such payments would be $940 billion.” [Austan Goolsbee, University of Chicago Booth School of Business, September 2004]

Ryan Authored LEgislation TO Add Private Accounts To Social Security

2005: Ryan Was Author Of Plan To “Save Social Security” By Using Its Surplus To Fund Individual Accounts. According to The Post-Crescent, “The new plan to ‘save Social Security’ is to use the surplus, which might be swell, if there were a surplus. The ‘surplus’ is the difference between the money workers and their employers pay into the Social Security pot and the amount the government pays out to retirees. This year, the ‘surplus’ is $69 billion. This new plan would divide the leftovers among workers 54 and younger. The average worker would get about $434 this year, deposited in an individual account. In 2008, when the surplus is expected to peak, he’d get $588. U.S. Rep. Paul Ryan, R-Wis., one of this new plan’s authors, points out that spending the Social Security surplus for other purposes ‘papers over the true size of the debt, and what this proposal does is unmask the debt.’ Exposing the shell game is a fine ambition, but Ryan goes on to add, ‘When the program is up and running, Congress will be faced with decisions whether to borrow, raise taxes or cut spending, which is what we should be faced with.’” [The Post-Crescent, 6/28/05]

Ryan Wrote Proposal Establishing Social Security Personal Accounts As Large As 10 Percent Of Wages. According to the Washington Post, “Two Ways and Means Committee Republicans, Reps. Paul Ryan (Wis.) and Sam Johnson (Tex.), have written separate large-accounts proposals. Ryan’s would establish accounts as large as 10 percent of wages, then guarantee that beneficiaries would receive at least the Social Security benefit level currently promised. ’What we show with our bill is that with large personal accounts, you don’t have to change benefits,’ Ryan said.” [Washington Post, 5/13/05]

In 2005, Ryan Authored Legislation To Create Private Accounts For Social Security. Ryan introduced H.R.1776, the Social Security Personal Savings Guarantee and Prosperity Act of 2005 on April 21, 2005. According to the Congressional Research Service the bill “S Amends title II (Old Age, Survivors, and Disability Insurance) (OASDI) of the Social Security Act (SSA) to establish: (1) a new part B (Personal Social Security Savings Program); and (2) the Social Security Personal Savings Fund in the Treasury, consisting of a separate Tier I Investment Fund and Tier II Investment Fund. Restricts participation in the program to certain individuals born on or after January 1, 1950. Allows a participating individual to elect to direct transfers from the Savings Fund, credited to his or her personal Social Security savings account, into one or more specified Tier III Investment Options. Prescribes requirements for personal Social Security savings annuity and other distributions. Establishes a Personal Social Security Savings Board to administer the program and set policies for the investment and management of the Savings Fund. Provides for recapture of corporate tax on yields attributable to personal Social Security savings account investments. Amends the Internal Revenue Code (IRC) to exempt the Social Security Personal Savings Fund and each Tier III Investment Option from income taxation. Excludes from gross income any qualified distribution from amounts credited to a personal Social Security savings account.” It was referred the House Subcommittee on Social Security. [H.R.1776, 5/9/05]

In 2004, Ryan Authored Legislation To Create Private Accounts For Social Security. Ryan introduced H.R.4851, the Social Security Personal Savings Guarantee and Prosperity Act of 2004 on July 19, 2004. According to the Congressional Research Service the bill “Social Security Personal Savings Guarantee and Prosperity Act of 2004 – Amends title II (Old Age, Survivors and Disability Insurance) (OASDI) of the Social Security Act to provide for the establishment of a voluntary, personal Social Security investment program under a new part B (Personal Social Security Savings Program) where a participating individual is able to invest in tax free personal accounts in a way that is similar to the way Federal employees invest in the Thrift Savings Program. Establishes in the Treasury the Social Security Personal Savings Fund, with personal Social Security savings accounts for deposit of the redirected Social Security contributions of participating individuals as mechanisms for crediting to such individuals amounts held in the Tier I Investment Fund, the Tier II Investment Fund, and Tier III Investment Options, also hereby established. Prescribes rules for personal Social Security savings annuity and other distributions.” It was referred the House Subcommittee on Social Security. [H.R.4851, 7/19/04]

Ryan Supported Bush Tax Cut Package That Used The Entire Social Security Trust Fund To Run The Government For Two Years. In 2001, Ryan voted in favor of the Bush tax cut package that reduced taxes by $1.35 trillion through 2010 through income tax cuts, relief of the marriage penalty, a phase-out of the federal estate tax, doubling the child tax credit, and providing incentives for retirement savings. Critics of the bill warned that the tax cut was too large and would jeopardize future Social Security benefits. According to the Wall Street Journal, the entire Social Security Trust Fund will be used “to fund the government over the next two years,” while “well over $100 billion of Social Security funds in each of the following three years” will be used for other purposes. Over the following ten years, more than $1.8 trillion of the Social Security Trust Funds would be spent on other purposes. The bill passed 240-154. [Roll Call 149, H 1836, 05/26/2001; Wall Street Journal, 2/5/02; Congressional Budget Office; Campaign for America’s Future]

Published: Oct 10, 2012

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