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82 IRET Congressional Advisory 1 (1999)

handle is hein.taxfoundation/iretcgadv0079 and id is 1 raw text is: IRET June 23, 1999 No. 82 PUT THE SOCIAL SECURITY TALKS ON HOLD Rep. Bill Archer (R-TX), chairman of the House Ways and Means Committee, is attempting to engage President Clinton in a dialogue on Social Security reform and is also Democratic members of the Committee. Rep. Archer brings t Security plan that he has introduced with Rep. E. Clay Shaw (R-Fla), chairman of the Ways and Means Social Security Subcommittee. The Archer-Shaw proposal contains many compromises, omitting various features to which the President might object. Rep. Archer accurately characterizes his plan as meeting the President halfway. trying to find common ground reaching out to Ways and Means o the table a Social of their taxes into real personal saving. And it must be funded in a manner that boosts national saving and improves the economy's performance to make it easier to care for an increasing number of retirees. The goal of these initiatives is to shrink or eliminate the current, unsustainable tax/transfer system and replace it with real, funded saving by each generation for its own retirement. Neither the Archer-Shaw plan nor the Clinton proposals adequately meet these requirements. Archer-Shaw is primarily a better lock-box to prevent Congress from spending current Social Security surpluses. It would also take a short step away from the current tax/transfer program by replacing a small portion of Social Security with personal saving accounts. Archer-Shaw's limitations are that it would leave most of the Social Security system in place, that it would not restrain the large projected growth of promised real benefits, that it would not create incentives to boost national saving, [Tihe President's proposals so heavily emphasize government control and income redistribution and the Ar cher-Shaw plan is already so modest that any mixture of the two would likely be worse ... than current law. While the idea of is appealing, the President's proposals so heavily emphasize government control and income redistribution and the Archer-Shaw plan is already so modest that any mixture of the two would likely be worse, not better, than current law. Effective Social Security reform needs to have three elements. It must rein in the unaffordable Social Security system by trimming excessive growth of real per capita benefits. It must compensate workers by letting them redirect some Institute for Research on the Economics of Taxation have to contribute and that it individuals no choosing how funds from their accounts. would give freedom in to withdraw new personal In the Archer-Shaw plan, individuals would claim special refundable income tax credits equal to 2% of wages, up to the Social Security wage base ($72,600 in 1999), and would the credits to Social Security guarantee accounts. (The plan could be made clearer if it did not inject an income tax credit into the funding mechanism but, instead, simply reduced the Social Security tax by 2 percentage points and required those 2 percentage points to be put into the new accounts.) An additional feature of the Archer plan is that it would abolish the Social Security earnings limit by 2006. Currently, seniors aged 62-64 lose 50 cents of Social Security benefits for every dollar they earn above $9,600 (threshold indexed by wage IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to inorming the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 * Fax 202-463-6199 0 Internet www. ret.org

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