Republicans from the House and Senate unveiled their proposal last week for a “first step” toward the private accounts for Social Security advocated by the White House.
At a press conference in the Capitol, House Ways and Means Social Security subcommittee chairman Jim McCrery, R-La., explained his proposal, the Growing Real Ownership for Workers, or GROW Accounts Act, along with subcommittee members Clay Shaw, R-Fla., Sam Johnson, R-Texas, and Paul Ryan, R-Wis.
Shaw said that the bill likely would be folded into a broader retirement bill, which he said would “hopefully” be taken up by the House “before the July 4th recess, and almost certainly by the August recess.”
That is important for insurers, who want to use the Social Security bill as a vehicle for inclusion of provisions that would allow them to sell new products. These include something dubbed “the paycheck for life,” which would provide retirees up to $20,000 tax-free through an annuity that provided them with a monthly payout after retirement.
Another provision would allow for inside buildup in long term care products and allow owners of annuities to switch their inside buildup into an LTC, among other products. Another proposed provision calls for automatic signup in a 401(k) plan upon employment.
Under the bill as introduced by the four Republicans, Social Security private accounts would be created for all workers under the age of 55, unless they choose not to participate. The Social Security surplus then would be apportioned to these accounts, averaging to approximately 2% of payroll tax per individual, and invested in no-risk, marketable Treasury securities. These Treasury bonds, McCrery stressed, “will have their names on them,” and can be inherited should the workers die. Upon retirement, the account balance would be used to help fund the worker’s Social Security benefit. The accounts will be managed by an independent board established under the legislation, which also would be charged with submitting a plan to Congress in January 2009 that would allow workers to invest their accounts in other, low-risk options.
“This bill will provide future retirees with fully inheritable Social Security accounts that can’t be spent by Congress, ensuring that taxes paid into Social Security are used for Social Security,” said McCrery.
Additionally, Shaw challenged Democrats to support the measure, “if they have any desire at all to address the problems with Social Security,” a theme that was echoed by others.
Johnson voiced the other theme of the event, noting that the GROW bill would be “the first step toward private accounts” for Social Security.
Also on hand to lend their support to the bill were Rep. John Shadegg, R-Ariz., chairman of the House Republican Policy Committee, Sens. Jim DeMint, R-S.C., and John Sununu, R-N.H., who were due to introduce a companion bill in the Senate.
“Whenever I talk to people in Arizona about Social Security, they tell me Congress needs to stop stealing the Social Security surplus,” Shadegg said. “This bill does just that. It makes sure Social Security taxes are used to pay for Social Security.”
Sununu also made the ownership argument to push for personal accounts. “When money is put into an account, it can’t be spent by the federal government,” he said. “It can’t be spent on other things.”
DeMint also challenged his counterparts on the other side of the aisle. “Democrats say they only want to spend Social Security funds on Social Security; we are about to find out if they are serious,” he said. “Let’s see if the party of ‘no’ can say ‘no’ to stopping the raid on Social Security.”
Even before the proposal was unveiled, a House Democrat criticized the proposal as a new version of the same privatization concept. “This is a bad foot in the wrong door of privatization,” said Ways and Means Committee Ranking Member Sander Levin, D-Mich., in a statement issued prior to the press conference. “This further exposes what Republicans are basically after, the replacement of Social Security with private accounts.”
McCrery said the GROW bill would not increase the budget deficit or cut spending but would increase the debt through the obligations of the Treasury bonds.
Under a new bill, private accounts would be created for all workers under the age of 55, unless they choose not to participate. The Social Security surplus would then be apportioned to these accounts.