As President Bush begins his second term, the American Association of Retired People welcomes the national debate on how best to strengthen Social Security. We encourage all Americans to be a part of this debate. It’s essential that we take steps now to strengthen Social Security so that it remains a guaranteed and inflation-proof benefit for future workers, retirees and families.
However, AARP believes diverting, or “carving out” private investment accounts from Social Security would not be a fiscally responsible option to preserving the system. While AARP strongly encourages individual retirement accounts, they should be in addition to, and not in place of, any part of Social Security’s guaranteed benefits.
Further, private accounts are expensive. Estimates are that a 2 percent private account (carve-out) from Social Security would create transition costs approaching two trillion dollars. That amount would eventually have to be covered by raising taxes, cutting benefits and/or taking on new debt. Increasing our national deficit is not prudent fiscal policy at a time when deficit figures are already at record numbers.
Instead, AARP supports investing part of the Social Security surplus so that it can earn higher returns than U.S. Treasury bonds. Raising the cap on the amount of wages taxed to support Social Security and including newly hired state and local government workers in Social Security as steps that can help put a down payment on the future Social Security shortfall.
Social Security is the most successful program in our country’s history. People look upon it as a promise, without an expiration date, that our nation has made to America’s workers and to those who have completed their work life—our retirees. Our challenge as a nation will be to ensure that Social Security continues to provide the promise of full benefits to future generations of Americans.
AARP Arizona State President