WASHINGTON (AP) — The stock market’s down, and investors are jittery. But Sen. Rod Grams thinks workers will like the idea of putting their money in Wall Street instead of Social Security.
The Minnesota Republican on Monday proposed one of the most far-reaching plans for privatizing the Social Security system. Workers over age 25 would be allowed to start putting most of the Social Security taxes they and their employers pay into private, government-approved investment funds. Workers under 25 would be required to enter the private system.
Congress is wrapping up its business this year and won’t take up Grams’ plan or any other proposal for Social Security reform for some time, but the senator said at a news conference that he wanted to make sure the coming debate includes “a full spectrum of options.”
Grams, who’s up for re-election in 2000, said Social Security privatization no longer is the political poison pill it used to be. He plans to hold town meetings in every Minnesota county over the next six months, starting Oct. 15 in Brainerd, Minn.
“It will be a major issue in the 2000 presidential campaign. Americans are basically dragging Washington into this arena,” said Grams.
Seniors groups and other critics of Social Security privatization say it’s too risky. But the idea has been gaining support. Ideas range from full privatization, which Grams has proposed, to having the government simply invest some of the Social Security trust fund in the stock market.
Supporters say private investment would earn a better return for Social Security dollars — now held in low-yielding U.S. Treasury bonds — just as pension money is expected to run short for the huge wave of baby boomers nearing retirement.
Grams cobbled together his plan from ideas offered by think tanks and a system already used in Chile. It would work this way:
ùWorkers over age 25 would be given a choice of staying in the current system or taking the Social Security benefits they’ve earned since age 30 and putting that money into government-approved funds. Most of their Social Security taxes would then be directed into the private funds rather than the government system.
ùRetirees would be guaranteed benefits at least 50 percent above the federal poverty line.
ùWorkers in the private system could retire at any age provided they had put enough money away to pay the minimum benefit without government subsidy.
To ensure that the system can pay all the benefits that are owed, Grams’ plan would require significant cuts in the federal budget. Spending would have to be cut by 5 percent next year and then held at the rate of inflation for another 10 years. In addition, the government would be required to sell $268 billion in federal assets.
Grams said his plan would make the Social Security system solvent by the year 2050. The current system would have $20 trillion in unfunded liabilities by then because benefits will outstrip tax revenue.
Grams thinks workers would get used to, and even like, the idea of managing their Social Security funds.
“You’re going to be awfully concerned and involved,” he said.