Wall Street Journal discusses Save Social Security Act

Retirement Choice

In the wake of the hullabaloo of Texas Gov. Rick Perry calling Social Security a "Ponzi scheme," at least one Republican in Congress is calling for a new retirement deal for younger workers.

On Monday, Rep. Thaddeus McCotter of Michigan introduced legislation to allow workers under the age of 50 to choose a personal retirement account. The plan would allow workers to invest 5% of the first $10,000 of earnings each year, and 2.5% of earnings above that up to the maximum taxable amount. This would mean young people could invest up to about $2,750 a year in a private IRA-type account.

So as not to adversely impact the Social Security pay-as-you-go structure, the plan would be financed by a payment each year from the federal operating budget into the worker's account. To fund that, reductions in other government spending programs would be mandated.

Mr. McCotter is quick to note that "no change is made in any way for those already retired today, or those anywhere near retirement." For those who choose to stick with the current Social Security program, there would be no change in benefits. Young workers who do choose the IRA plan would see a pro-rated reduction in Social Security payments, offset by the funds in the personal account.

Liberals will attack the plan as killing Social Security. But according to Social Security expert Peter Ferrara, "the Chief Actuary of Social Security scores the bill as ultimately eliminating all future deficits of Social Security, with no benefit cuts or tax increases." He also finds that "most workers would be much better off under this system when they retire."

After the bruising debate six years ago when George W. Bush pushed for a personal account plan, many Republicans have been fearful of touching Social Security. But the McCotter plan is the first to guarantee benefits and provide young workers a better return on their payroll tax dollars. If President Obama is serious about entitlement reform, Mr. McCotter's bill is worth a look.

-- Stephen Moore, Wall Street Journal