14 Jan 2007 The Social Security Choice We Face

Rep. Mike Pence has an op-ed in the Wall Street Journal saying three important things about Social Security:

1) The White House must take tax increases off the table.Says Pence: “Such a tax increase would likely lift or eliminate the cap on the amount of salary and wages subject to the payroll tax, currently at $94,200. Raising payroll taxes would prove devastating to working Americans, small business and the economy as a whole. Worse, it would only serve as a short-term band-aid to Social Security’s financial woes.

“According to the Heritage Foundation, eliminating the cap will increase taxes by $484 billion over five years. This 12.4 percentage point marginal tax rate increase would hit middle-income families struggling to make ends meet, pay for college and save for retirement. Much of this increase will be borne by three million small-business owners who pay both the employer and employee portion of the tax hike. These entrepreneurs are on the forefront of job creation, and such a tax would cause millions of layoffs. Overall, the entire economy would slow by 2% to 3%, threatening the standard of living and economic opportunities of every American. In exchange for this massive tax increase, Social Security’s financing will be preserved for roughly seven years.”

2) Focus on personal savings accounts. Says Pence: “Social Security reform must be properly understood. It is not about achieving solvency; it is about improving the system so that it offers a better deal for younger Americans through personal savings accounts. Focusing on solvency will lead inevitably to tax increases and benefit cuts. Focusing on personal retirement accounts improves the chance of enacting sound public policy that also makes the system solvent.”

3) Congress must stop embezzling. Pence says: “Third, the administration should submit a budget that fully protects the Social Security surplus from being used to subsidize government largesse, which Patrick Moynihan once described as ’embezzlement.’ Voters have repeatedly said loudly and clearly that they object to raiding the Social Security surplus. It is time for the administration to either offer a budget aligned with those expectations, or propose cutting the payroll tax immediately to end the historic practice of over-collecting for a pay-as-you-go system. Doing both would quickly restore the public’s shattered confidence in the way we spend their money.”

Pence says if we reformers can’t get a good bill through this Congress, we’re better off passing nothing now: “Republicans don’t have to pass a bad Social Security reform bill. If we lack the votes now to pass legislation that will actually preserve the system and protect our nation’s economic expansion, we would be wise to spend the next two years seeking to win the debate and leave a foundation of arguments that will not unravel.”