The video above is of Rep. Paul Ryan (R-WI) in 2005 when he was trying to sell his plan to privatize Social Security. Paul Ryan was one of two people to sponsor the privatization of Social Security in the failed attempt under the Bush administration. It would have a hidden tax on middle class workers and by forcing the SSA Trustees to invest in stocks …. anyone who owned stocks would see HUGE windfalls in their wealth. And 57% of all capital gains go to the 1% wealthiest Americans. Fact. (source)
The Huffington Post explains the video above HERE as Paul Ryan tries to sell the privatization of Social Security in 2005:
Ryan, in a March 2005 interview on C-SPAN, described his Social Security plan in detail. His bill would have allowed people under 55 to divert roughly half of their payroll taxes away from the traditional program and into a private account “owned” by the individual but managed by Social Security, and invested in stocks and bonds. But that plan did not cut any benefits, but brought such an astronomical price tag that the Bush administration called it “irresponsible.”
“Individuals own their own retirement accounts that are invested in markets and stock and bond indexes and things like that,” Ryan said of his plan. “The system is off the hook to pay you that part of your benefit from those dollars, because you’re going to get that benefit out of your personal retirement account. Because the system’s off the hook to pay you that benefit, the system reduces its expenditures by that amount, that helps bring the system into solvency.”
Ezra Klein writes a must read piece explaining what Paul Ryan’s bill to privatize Social Security ACTUALLY did HERE; an excerpt:
Ryan’s Social Security privatization proposal, the Social Security Personal Savings Guarantee and Prosperity Act of 2005, which he sponsored along with then-Sen. John Sununu (whose father has been a prominent Romney surrogate), would have allowed workers to funnel an average of 6.4 percent of their 12.4 percent payroll-tax contribution to a private account [...] At retirement, all participants in the plan would be required to buy an annuity.
The Social Security Administration concluded that the Ryan-Sununu plan would require huge increases in general budget revenue to make up the shortfall left in payroll tax revenue. Specifically, revenue would have to increase by 1.5 percent of GDP every year, an analysis by the Center for Budget and Policy Priorities found, or about $225 billion at current GDP. That’s a big honking tax hike. What’s more, under the plan, investments in the stock and bond markets would skyrocket such that by 2050, every single stock or bond in the United States would be owned by a Social Security account. This would mean that the portfolio managers at the Social Security Administration would more or less control the entire means of production in the United States.
So if you’re keeping score – not only does his bill privatize social security but it also has a hidden tax on the middle class and would further inflate stock prices thus enriching those who already owned stocks.
Fortune magazine even wrote about Paul Ryan’s plan to privatize Social Security and what it doesn’t work HERE:
The problem is that the government would need to borrow even more massive amounts under Ryan-Sununu than under the Bush plan because the accounts are so much larger. Without big spending cuts, Ryan-Sununu would require an additional $200 billion in annual borrowing above the amount needed to pay down the bonds and finance the deficit. Is it realistic to think that financial markets could look beyond such massive debt? It’s highly possible we’d see foreign investors flee and interest rates soar.
The Seattle Times wrote about this Republican crusade in 2005. They pointed out that the Social Security Trustee concluded Paul Ryan’s plan to privatize Social Security would only make the situation WORSE for seniors. Article HERE; an excerpt:
An analysis of a similar plan conducted by the nonpartisan actuary of the Social Security Administration concluded that it would worsen the nation’s fiscal picture. That plan, introduced in the Senate, would require the transfer of nearly $1 trillion in general tax funds to the Social Security system to avoid accelerating the date when the Social Security system becomes insolvent.
“The total debt held by the public is increased indefinitely,” Chief Actuary Stephen Goss wrote.
That’s because the Senate plan and the new House GOP proposal depend on borrowing from the public to make up for money now being used to fund government but would be needed to fill the personal accounts. The borrowing would be needed during the first 11 years of the program and would never be fully repaid. That means interest payments on the debt would continue, and a bureaucracy would have to be created to administer the program.
On February 28, 2005 – Paul Ryan was involved in a townhall with PBS as he tried to sell his Social Security Privatization plan … he said this HERE:
“The most humane way to fix Social Security is to include personal retirement accounts. Without those then you have no choice but to drastically cut benefits or raise taxes and that simply means you will consign current and future workers to a miserable rate of return on their payroll tax dollars.”
He was then asked why people were against privatization of Social Security and he said:
“I think part of it is politics, part is philosophy. Philosophically or ideologically some people do not like the notion of social security being a system where individuals own their own accounts. They instead prefer the notion where the government controls their retirement and controls their benefits.”
And yes – the Social Security trust fund currently has a $2.7 trillion surplus in it. You can see the Social Security Trustee’s last report and analysis HERE.
But for all of Rep. Paul Ryan’s concern about “strengthening Social Security” and his doom and gloom scenarios for Social Security … in November of 2005 – he was given an opportunity to require companies to fully fund their pensions only 7 years. He was the only Republican to vote against protecting American workers’ pensions. (source).
And if you want to understand the politics of all of this. In 2005 – when Republicans tried to push forward on Paul Ryan’s plan to privatize Social Security … they often talked about government raiding Social Security as if all that was left was a bunch of IOU’s. Jack Kemp wrote an op-ed HERE saying that this was an idea “whose time has come”. They say the only way to protect younger workers and “stop the raiding” of Social Security trusts is to privatize it. Later Republican referred to that as “personalizing” it.
And on February 13, 2005 – the NY Times explains WHY Republicans use the word “personalizing” as opposed to “privatizing” even though they are the same thing. Article HERE; an excerpt:
The biggest current debate is over Social Security. The Republicans refer to personal accounts when describing the proposal to let workers invest part of their payroll taxes. The other side calls them private accounts, a few syllables away from privatization.
Republicans are fighting that word – which they once embraced – by saying that it incorrectly implies that their plan takes the program out of government. “Personal is ownership, private is outside the Social Security system,” said Representative Paul Ryan, Republican of Wisconsin.
He acknowledges that polls show the pri-word is a loser. David Winston, a Republican pollster, said that a survey he took in December found that people opposed “privatization” by 53 percent to 38 percent. The same people supported “personal retirement accounts,” 60 percent to 35 percent. “The brand of ‘privatization’ at this point is not necessarily popular,” Mr. Winston said.
But these snake oil salesmen want you to start a run on the Social Security Trust fund just like scared depositors did right before the Great Depression. If the populace has mass panic and a lack of confidence in the program … then there will be a political shield to protect those trying to move forward to privatize it.
As he says in the video in 2010 – his plan would allow anyone under 55 years of age to invest up to 33% of their payroll taxes into a privatized account (which is now slightly lower than the 50% he proposed in 2005). He would then increase the retirement age for seniors because people are living longer … and as he puts it “that makes sense”. Conservatives no longer like to call this “privatization” because that doesn’t poll well …. so they just call it “personalizing” because that sounds better. Same pig; different lipstick.
But this plan is a slow boil to eliminating Social Security. Even though Social Security currently has a $2.2 trillion surplus …. conservatives are stoking fears that Social Security won’t be around any longer for young people. That fear could create a “run on the banks” mentality where young people start to defund the program more leaving conservatives to argue that the program simply isn’t sustainable because it’s going bankrupt. Well – if we allow a privatization plan to occur – that’s exactly what would happen … Social Security would go bankrupt. That’s their entire plan.
The easiest answer to fixing Social Security is eliminating the payroll tax cap and treating all capital gains as part of that income. If you did that – you could actually lower the tax rate for everyone else or it would keep Social Security solvent for another 75 years. And Social Security isn’t an entitlement … it’s a contract, an investment just like an annuity that every American has paid for their entire life. You pay into Social Security and just like in an annuity … you get a guaranteed rate of pay back even if it means you make more than what you paid into it. That’s how investments work.
When you hear Republicans talking about “strengthening” Social Security – get prepared for the pain.
As Paul Ryan acknowledges above during his interview with Charlie Rose … privatizing Social Security accounts is NOT NECESSARY but as he puts it “I personally prefer it”. He wants people to think that it’s not going to be there for people in the future even though he acknowledges it “is the most successful program ever created in history”. So successful that he wants to privatize it.
Even Rep. Ryan has acknowledged that the absolutely worst case scenario would mean that in 26 years … Social Security benefits would be cut by 24% and then Social Security would still be funded at 76% of it’s current rate in real dollars for at least another 75 years. The worse case scenario assumes unemployment remains at 8% and that Congress takes NO action in order to strengthen Social Security.
Right now – taxes for Social Security and Medicare go up to 104k in personal income. If you made all of your income in capital gains like most of the rich do … then you don’t pay payroll taxes. If you are a CEO making $20 million a year in salaries and bonuses – then you pay the exact same amount in payroll taxes as someone making 104k a year. The easiest answer to solve this problem is simply to remove the cap on incomes and revenue streams. If someone makes $100 million in stock … they should pay the same % in “payroll taxes” as the average middle class person does.
The reason there is a cap on the payroll tax is to protect the wealthiest Americans. After all – conservatives would argue … why should they have to pay for everyone else and to do so would be SOCIALISM and redistributing wealth from the wealthy who worked hard for their money to the envious middle class people who only want to take wealth from the hard working rich people. That’s the conservative argument.
And don’t kid yourself about payroll taxes – they’re a big deal. Payroll taxes account for 1/3 of the total taxes the government takes in. And that’s shouldered almost exclusively by the working class … people making less than $100k a year. And as Paul Ryan recognizes “most people pay more in payroll taxes than they pay in income taxes” … that’s true. But not the rich.
But when an older gentlemen asks Paul Ryan why he doesn’t support raising the cap on payroll taxes – Paul Ryan says it only keeps Social Security solvent for 6 years which is a lie.
Thom Hartmann explains why “means testing” Social Security is actually bad for the program. Simply put – to “means test” the program … then it becomes “welfare”.
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