Herman Cain on Social Security
Republican Businessman & Talk-Show Host; 2011 GOP frontrunner
CAIN: I am a firm believer in solving problems. Old ideas have prolonged the problem. I am a strong proponent of an idea that Bush introduced, these optional personal retirement accounts. 30 countries have optional personal retirement accounts. Look at the Chilean model--why can't we do that? We can do it if we fight the demagoguery and fight all those who don't want the current system to change. We need to educate the public so they understand this. 30 years ago, Chile had a social security system like we do--and the system was broken. When they gave people the option--within 3 years, 90% of people said we want the option because it became their money on an account with their name on it and they don't have the problems we have dealing with social security. If older Americans who have paid into the system, they have a choice to continue on, or they can take the option of controlling it yourself.
CAIN: It is going to take a long time to work ourselves out of this mess that has been created for decades. We can't deal with unfunded liabilities, we have to say: Starting from now all social security contributions will go towards social security benefits only. What the money is collected for, let's put it towards that only.
GINGRICH: Private sector money in a personal social security account [should go] into the private sector. We need to have separate money between social security and what would be in the private savings account.
CAIN: In the private sector, most companies have moved to a defined contributions account. Th
CAIN: I don't buy beer. You have to start with the biggest tax cut a lot of Americans pay, which is the payroll tax, 15.3%. That goes to 9%. That's a 6 percentage point difference, and the prices will not go up. So they've got a 6 percentage point difference to apply to the national sales tax piece of that, and in doing so they have the flexibility to decide on how much they want to spend it on new goods, how much they want to spend it on used goods, because there is no tax on used goods.
BACHMANN: From my experience in Congress but also as a tax lawyer, the last thing you would do is give Congress another revenue stream, and this gives Congress a pipeline in a sales tax. Once you get a new revenue stream, you're never going to get rid of it. When you take the 9-9-9 plan and you turn it upside down, I think the devil's in the details.
It's a personal retirement account. And in the last 30 years, not only has Chile succeeded with that model, but 30 other countries have done so. I don't think we're doing a service to the American people to keep bantering about what you call it and what you don't call it. The solution is: Fix it.
CAIN: I don't care what you call it, it's broken. And here's my solution. Start with optional personal retirement accounts. In 1981, the Galveston County employees, they opted out because that was a very short window of opportunity. They took it. Today, when people retire in Galveston County, Texas, they retire making at least 50% more than they would ever get out of Social Security. Secondly, allow younger workers to have personal retirement accounts as an option. Current seniors will not be affected. It's to give the option to the younger workers. The Galveston County model worked, and it also worked in the small country of Chile. Instead of giving it to the states, let's give it back to the workers. That's what personal retirement accounts will do.
CAIN: I happen to believe that yes, Social Security, it needs fixing, not continuing to talk about it. I believe in the Chilean model, where you give a personal retirement account option so we can move this society from an entitlement society to an empowerment society. Chile had a broken system the way we did. Thirty years ago, a worker was paying 28 cents on a dollar into a broken system. They finally awakened and put in a system where the younger workers could have a choice. A novel idea. Give them a choice with an account with their name on it, and over time we would eliminate the current broken system that we have. That is a solution to the problem. Rather than continuing to talk about how broken it is, let's just fix it using the Chilean model.
Cain: I would focus on restructuring entitlement programs instead of reshuffling them. I support personal accounts as an alternative for younger workers to invest in. It worked in Chile and TX. I would make targeted cuts to federal spending with vertical & horizontal cuts across many programs, as I did in business.
Q: What entitlements would you go after?
Cain: I would focus on major entitlement reform, focusing on Social Security.
CAIN: Let's restructure Social Security. I support a personal retirement account option in order to phase out the current system. We know that this works. It worked in the small country of Chile when they did it 30 years. I believe we can do the same thing.
Q: Are you going to raise the retirement age as president?
CAIN: I don't have to raise the retirement age, because that b itself isn't going to solve the problem. If Congress decides to do that, that's a different matter. Let me give you one another example where this approach has worked. The city of Galveston, they opted out of the Social Security system way back in the '70s. And now, they retire with a whole lot more money. Why? For a real simple reason--they have an account with their money on it. We've got to restructure the program using a personal retirement account option in order to eventually make it solvent
Nothing should be off the table. Every federal agency and expenditure must be reviewed with a keen eye and a red pen. Leaders should be willing to shrink budgets by targe percentages, and those charged with implementing those changes must be held accountable.
And it works! I have served as an executive of several major corporations. When times were tough and money was tight, I asked our employees to cut back drastically and explained why it was necessary, and they did. We have all had to make difficult decisions in our own household or work place. Serious but responsible belt tightening can save businesses, and it can also save our country with the right leadership.
The federal government was never intended to be in the business of encouraging one behavior over another, or favoring one group of people over another. This goes beyond providing assistance to the needy. And government was never intended to be in the business of taking people's money for a retirement system, and then increasing the retirement age as the money starts to run out.
A number of systems have been offered to save Social Security, including Pres. Bush's proposal to enact an optional system of personal retirement accounts. Instead of working on a solution to the looming Social Security crisis, however, Congress continues to shirk its responsibility to the public by increasing the retirement age and decreasing benefits to future retirees.
Liberals do not want to face the reality that the Social Security structure is insolvent. Congressional liberals view the Social Security payroll tax as another mechanism designed to relieve you of your money and provide you nothing in return. Millions of citizens should question why we keep in place a retirement system that is not funded at the necessary levels.
Three fundamental changes must be made if we are to keep the promise of benefits to our seniors & the soon-to-be-retiring baby boomers while providing more benefit options to future generations. First, we must establish a system of optional personal retirement accounts. Individual citizens--not the federal government--will have the power to decide how a portion of their Social Security contribution is invested. Second, benefits must no longer be reduced based on secondary or supplemental incomes. Third, seniors must be allowed to leave the balance of their personal accounts to their widows, children, and any other heirs they designate.
Our so-called progressive system of taxation at the federal level is based on the premise that those who make the highest incomes should pay proportionately the most for the government services that benefit all citizens. Those at the lowest income levels are in fact hit the hardest by our system of taxation. 100% of their wages are subject to the Social Security and Medicare taxes, which are of course automatically withheld from their paychecks. When they retire and begin receiving their monthly Social Security benefits, they are taxed again because our government considers your Social Security benefits income--even though you already earned the money decades ago.
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