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Statement on Social Security

Privatization is not a plan to save Social Security; it is a plan to dismantle Social Security. Privatization means increased retirement risks, severe cuts in Social Security benefits, and a multi-trillion dollar increase in the federal debt.

Privatization diverts money out of Social Security into individual accounts leaving an even larger solvency problem. Privatizers fill this funding gap by dramatically cutting Social Security benefits. They cover the rest by borrowing money, thereby increasing the debt burden on all taxpayers by trillions of dollars over the next half century.

If Congress does nothing - makes no changes or "reforms" - Social Security is projected to deliver full guaranteed benefits until at least 2037. Even after 2037, again without any changes, the trust funds will continue to pay 76 percent of benefits for years after that.

Right now, Social Security provides a guaranteed income, paying benefits every month for life, with increases for inflation. After adjusting for risk, Social Security has a rate of return equal to that of any mix of financial assets in private accounts.

In fact, the Boomers have helped pre-fund part of their benefits by building a huge surplus that should keep Social Security alive and well for many years. With privatization, however, workers would end up in a double bind - paying taxes to support the Boomers' retirement plus investing money in their own individual accounts, in hopes of building retirement funds for themselves.

To make matters even worse, today's workers would have to bear the transition costs of switching to privatization, estimated at nearly $5 trillion over just the first twenty years- a cost that would fall on today's young people.

Administrative costs for Social Security are very low - less than 1% of the program's budget. Diverting money to the stock market would incur the very high costs of brokers' commissions, mutual fund management fees, and other expenses inherent in buying and selling stocks and bonds.

Small investment accounts are very expensive to administer. Commissions and fees could easily burn up as much as 15 cents out of every dollar of a worker's annual investment as they do in some countries with privatized systems.

Wall Street brokers and fund managers would stand to make billions of dollars a year thanks to privatization, so it's no surprise that they strongly support the privatization movement!

I will fight the "privatization" movement and to keep Social Security solvent.


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