The White House is continuing to push for legislation which would create private accounts funded by payroll taxes, even though Democrats remain almost unanimously opposed and some top congressional Republicans want to scale back such plans. Some House Republicans support Ways and Means Chairman Bill Thomas' (R-CA) proposal, which creates these accounts and while also claiming to move the program towards solvency. Yet although he has the support of some, many House members on both sides of the aisle continue to remain skepitcal about moving a solvency bill loaded with benefit cuts.
As this Economic Snapshot from the Economic Policy Institute illustrates, the plan to create private accounts out of the Social Security surplus is less sound than it appears. As EPI says, "Proponents tout this plan as a way to 'stop the raid' on Social Security, but, like other privatization proposals, it diverts money from the trust fund and relies on infusions of general revenues to avoid worsening the trust fund balance."
The Social Security surplus next year is projected to be around $85 billion. EPI estimates, "credits in the accounts would start at 2.2% of payroll in 2006 and shrink thereafter, dropping below 2% by 2009, below 1% in 2014, and to zero in 2017. Over 11 years, the typical worker would probably accumulate about three to five thousand dollars in such an account and face a comparable debt to the government."
