Newt Gingrich on Social Security
Former Republican Representative (GA-6) and Speaker of the House
GINGRICH: Well, it is, as a historian, a fact-based model that has Galveston, Texas, and the entire country of Chile as testing grounds. Chile has done this for over 30 years. It's totally voluntary. If you want to stay in the current system, stay in it. If you are younger and you want to go and take a personal savings account, which would be a Social Security savings account, you can take it. The historic record in Chile is the average young person gets two to three times the retirement income. In 30 years they have never written a single check, because nobody has fallen below the minimum payment of Social Security, and these are historic facts.
The key is there is $2.4 trillion in Social Security which should be off budget, and no president of the United States should ever again say because of some political fight in Washington, I may not be able to send you your check. That money is sitting there. That money is available. And the country ought to pay the debt it owes the people who put the money in there.
If you have your own personal social security savings account and you want to retire early why would Congress tell you not to? Let's get back to allowing Americans to control own lives.
It is a fraud and a lie the way that Congress deals with social security. The American people have put money into a trust fund. But every politician wants to find a gimmick to balance the budget off the backs of working Americans. If you take it off budget, you could solve social security. Since Johnson, we have been hiding the real size of our budget deficit by obscuring it with social security. We need to be honest and separate these two things and deal with them.
GINGRICH: No, not necessarily.
Q: What would you do to fix Social Security?
GINGRICH: President Obama twice said recently he couldn't guarantee delivering the checks to Social Security recipients. Now, why should young people who are 16 to 25 years old have politicians have the power for the rest of their life to threaten to take away their Social Security? Now, I just want to make two simple points about Social Security and how you save it. The first is, you get back to a full employment economy. The second is, everybody who is older and wants to be totally protected, fine, no change. But if you're younger and you would like a personal account, you would control instead of the politicians. And you know you'll have more money at the end of your lifetime if you control it than the politicians. Why shouldn't you have the right?
Beginning at any size, accounts could be expanded over time until workers can choose to substitute them for all their Social Security retirement benefits. This could be accomplished using just the 6.2% employee share of the Social Security payroll tax, still leaving workers with close to twice the benefits Social Security promises under current law (but which in the future it will not be able to pay).
A bill introduced by Rep. Paul Ryan maintains the current social safety net in full by including a federal guarantee that if any retiree's account cannot pay at least what Social Security would under current law, the federal government would pay the difference. Because capital market returns are so much higher, however, it's unlikely the government would ever have to pay off this guarantee.
Suppose that workers were free to save and invest, in their own personal accounts, up to roughly 50% of what they currently pay in payroll taxes. Employers would contribute the same amount to their workers' personal accounts out of the payroll taxes they currently pay on behalf of their employees. This plan was proposed in a bill by Rep. Paul Ryan (R-WI) and Sen. John Sununu (R-NH). Lower income workers would be allowed to invest a slightly higher percentage of what they currently pay in payroll taxes, and higher-income workers a little less.
If a personal account pays more than the Social Security benefits it replaces, [the taxpayer] gets to keep the gain. If the account is insufficient to pay for all the benefits it replaces, the government pays the difference.
The Ryan-Sununu bill provides for a personal social security savings account option for Social Security and solves the long-term problems of the program. Under this bill, workers & employers would still contribute a total of 6.4% [of income]. But this is money that belongs to the workers in their own individual accounts, so it is not a tax that goes to the government. The Ryan-Sununu plan would be effectively the largest tax cut in world history.
Personal social security savings accounts will in fact fulfill the promise that the Social Security system cannot deliver: a guaranteed retirement account.
69% of workers aged 45 to 74 reported that they plan to work in some capacity in their retirement years, even if they won the lottery. For those aged 33 to 52, the younger boomers, 75% said they would work into their retirement years.
The baby boomerís desire to stay active is good news for the economy. We must recognize that rethinking government rules for retirement and reforming Medicare to encourage economic activity are key steps toward a better future. The policies that may have made sense in earlier eras when people died younger are simply not applicable in an era when more people are healthier longer.
One of the steps we need to take is to amend the law so that an individualís paycheck reflects the amount of money that is actually being paid into the FICA system. People will realize that they are paying twice the tax they believed they were paying. For over half the American population the total FICA tax they are paying is bigger than their income tax.
[As part of the Contract with America, within 100 days we pledge to bring to the House Floor the following bill]:
The Senior Citizens Fairness Act:
Raise the Social Security earnings limit, which currently forces seniors out of the workforce; repeal the 1993 tax hikes on Social Security; and provide tax incentives for private long-term care insurance to let older Americans keep more of what they have earned over the years.
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