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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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