Thompson's social security rollout
Posted: Friday, November 09, 2007 4:26 PM by Domenico Montanaro
From NBC/NJ's Adam Aigner-TreworgyWASHINGTON, DC -- Calling the current social security system “unsustainable” and “draconian cuts” in benefits inevitable, today
Thompson announced his “plan to save social security.” Continuing with the themes he has been trumpeting on the campaign trail, the Thompson plan calls for optional private social security accounts and the indexing of social security benefits to inflation rather than wages.
Many economists say due to the slow growth of inflation compared to the relatively rapid growth of wages, such indexing would cause a significant decrease in benefits for future generations. Thompson dismissed that assessment saying that the “baseline” for any proposal is the current system, and that under the current system future promises cannot be delivered.
“What our proposal is, is that instead of not being able to deliver something that we have promised, which is wage indexed benefits, let’s equalize them,” Thompson said at a press conference following his off-camera policy rollout. “Why should one generation have a greater level of benefits, dollar for dollar inflation include, than another. Let’s give the same level of benefits to everybody and that’s what we’re proposing.”
Indexing benefits to inflation would take care of 70 percent of the problem, Thompson said, while the rest of the problem would be addressed through “Voluntary Personal Retirement ‘Add On’ Accounts” that would require individuals who were uninterested in participating to opt out at the beginning of every year.
These accounts would work much like a 401(k), automatically deducting 2 percent of an individual’s wages and putting that money into a Personal Retirement Account. The government would match this deduction at $2.50 per every $1 deducted up to $1,000 per month, and $0.50 for every $1 deducted after that. All of the money in the Personal Retirement Account, including the government’s matching funds, could be invested in stocks and/or bonds chosen from a menu of options.
The government’s matching funds would come out of the current social security trust fund, which would be initially depleted and then replenished through additional tax revenue acquired by the inflation indexing.
Thompson refused to take raising the cap on taxable income or increasing the age of eligibility completely off the table, but he did say, “I don’t think that particular idea is a good one. I know it’s been proposed. I think that’s one of Senator Clinton’s proposal.”
“There are a lot of different ways to approach this,” Thompson said. “This is one that I think makes a lot of sense from a lot of different stand points. We would put that up against any other proposal that’s out there, if there was another proposal out there. Nobody else, as far as I know, has really come with a serious proposal to do anything about social security, other than to recognize that it’s a real problem that somebody someday is going to have to solve.”
