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| Building Security                                                     |
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| By [Newt                                                              |
| Gi                                                                    |
| ngrich](http://www.aei.org/scholars/filter.,scholarID.20/scholar.asp) |
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| Posted: Monday, August 16, 2004                                       |
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| ARTICLES                                                              |
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| Baltimore Sun                                                         |
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| Publication Date: August 15, 2004                                     |
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| ![](media/image1.png){width="1.0416666666666666e-2in"                 |
| height="0.10416666666666667in"}                                       |
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| President Bush began talking about the need for personal Social       |
| Security accounts when he was a candidate. He has continued to        |
| advocate that we can save Social Security by using the power of the   |
| market to increase savings far better than government can.            |
|                                                                       |
| Now Rep. Paul Ryan, R-Wis., and Sen. John Sununu, R-N.H., have        |
| introduced in Congress what may become the most sweeping, visionary,  |
| breakthrough legislation to help enrich working people in my          |
| lifetime.                                                             |
|                                                                       |
| It is well documented that if nothing is done to fix Social Security  |
| before the baby boomers retire, payroll taxes would have to increase  |
| by 20 percent or retirees would face a 30 percent cut in benefits.    |
| The Ryan-Sununu bill would protect, modernize and expand Social       |
| Security in a way that would end the tragedy of seniors retiring into |
| poverty.                                                              |
|                                                                       |
| The bill would allow workers the freedom to choose to shift what they |
| now pay each week in payroll taxes, an amount that is roughly the     |
| same as what appears in the FICA box on their pay stub, into their    |
| own personal account.                                                 |
|                                                                       |
| On average, about 6.4 percent of the current 12.4 percent Social      |
| Security payroll tax would go into a worker\'s personal account.      |
| Workers could choose from a list of officially approved safe and      |
| secure investment funds managed by firms regulated by the government  |
| in a system similar to the Federal Employee Thrift Retirement System. |
| This makes the system easy and manageable even for new or less        |
| experienced investors.                                                |
|                                                                       |
| Under the Ryan-Sununu bill, Social Security would not only stay in    |
| permanent surplus, it would achieve the largest reduction in          |
| government debt in world history by eliminating the current \$11      |
| trillion unfunded liability of Social Security, nearly three times    |
| the current federal debt held by the public. The bill does this by    |
| replacing the current unfunded liabilities of Social Security with    |
| fully funded personal accounts.                                       |
|                                                                       |
| In fact, the bill goes a step further by providing a federal          |
| guarantee that workers who choose personal accounts would receive at  |
| least as much as promised by Social Security, maintaining the federal |
| safety net for retirees provided under current law and taking the     |
| risk issue for workers completely off the table. This feature         |
| achieves a key Social Security policy goal for most Democrats\--full  |
| payment of currently promised benefits.                               |
|                                                                       |
| Saving Social Security from bankruptcy while guaranteeing current     |
| benefits without any tax increases\--not only for today\'s seniors or |
| workers nearing retirement but for anyone in the future\--is more     |
| than enough reason to support this bill. But the most powerful        |
| argument is that it would pay substantially higher benefits than      |
| seniors now get from Social Security.                                 |
|                                                                       |
| A recent study by Peter Ferrara, a senior fellow at the Institute for |
| Policy Innovation, showed that personal accounts of 6.4 percent       |
| invested half in corporate bonds and half in stocks earning standard  |
| long-term market investment returns would provide workers across the  |
| board with roughly two-thirds more in benefits than what Social       |
| Security promises but cannot pay. An account invested two-thirds in   |
| stocks and one-third in bonds would pay workers over twice what       |
| Social Security promises today.                                       |
|                                                                       |
| But it gets better. Currently, after a working lifetime of paying     |
| into Social Security through the payroll tax, workers accumulate zero |
| dollars. Under the Ryan-Sununu bill the chief actuary of the Social   |
| Security Administration calculated that within 15 years, working      |
| people across the board will have accumulated collectively over \$7   |
| trillion in today\'s dollars in personal accounts.                    |
|                                                                       |
| Over a working lifetime, the average worker with a conservative       |
| balanced portfolio invested in both stocks and bonds will have        |
| accumulated more than \$400,000. Compare that with seniors retiring   |
| today who have zero dollars accumulated in the current Social         |
| Security system.                                                      |
|                                                                       |
| Such vast, broad-based wealth ownership would transform America,      |
| economically, socially and politically. Capitalism only works when    |
| people have capital. For the first time in history, the working poor  |
| will have access to wealth creation. Personal accounts will finally   |
| give everyone access to the markets that create wealth.               |
|                                                                       |
| Any amount in the account when the worker dies can be left to loved   |
| ones. Every worker would become a personal owner in America\'s        |
| business and industry. There would no longer be a dichotomy between   |
| labor and capital because every individual would be both a worker and |
| a capitalist. The personal account would be locked until the worker   |
| retired.                                                              |
|                                                                       |
| This vast new supply of capital would be available for investments in |
| new, growing and established business enterprises. The American       |
| economy would take another leap ahead into the 21st century,          |
| providing along the way broad streams of new jobs and higher wages.   |
|                                                                       |
| Finally, a key feature of the bill is that the personal accounts      |
| mirror the progressivity of Social Security, allowing lower income    |
| workers to devote to the accounts a higher percentage of their        |
| payroll taxes than higher income workers. This means that lower       |
| income workers would proportionally gain as much from the accounts,   |
| or even more, than higher income workers. It would be intellectually  |
| dishonest to say the rich do better than the poor under this plan     |
| because just the opposite is true.                                    |
|                                                                       |
| What Mr. Ryan and Mr. Sununu have proposed is historic. They have     |
| fashioned a plan that makes the idea of a personal account option for |
| Social Security not only politically viable but, indeed, politically  |
| irresistible.                                                         |
|                                                                       |
| *Newt Gingrich is a senior fellow at the American Enterprise          |
| Institute.*                                                           |
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