The Choice Between Delusion, Pain, and Empowering American Workers
The Obama and Romney plans for Social Security have a few things in common: Both continue to empower big government to make decisions instead of empowering the American people, and neither acknowledges that we need profound reform in order to save and strengthen Social Security.
President Obama will continue trying to delude Americans into believing that the current system will survive without structural reforms. For all of its faults, the Obama plan at least rejects the notion of cutting benefits – though it is likely he and the Democrats ultimately will try to raise taxes at some point in the future to address Social Security's trillions in unfunded liabilities.
Governor Romney understands that the system needs reform, but the reforms he proposes cut benefits and cede even more decision-making power to Washington bureaucrats.
The Romney plan will raise the retirement age, and it will introduce "means testing" – rationing benefits based on one's income. The Romney plan sets out to "slow the growth in benefits for higher-income retirees," but, in reality, his new plan to calculate benefits will likely cause benefits for middle-income Americans to be slashed – under one model, average-income Americans in 2050 will receive about 15% less under the Romney plan than under the existing plan.
Newt Gingrich rejects the idea that we can solve our budget and debt crisis by some combination of cutting benefits and raising taxes within the current framework of these two programs.
Americans work their entire lives to pay for their hard-earned retirement benefits, and as Americans now enjoy longer and healthier lives than ever, these benefits must be protected and made even stronger.
Instead, we need to think outside the box with fundamental, structural reforms that would transform and modernize Social Security, changing how it works to achieve its goals.
The Gingrich plan empowers Americans with the option to save and invest what they and their employers would otherwise pay into Social Security into personal savings accounts.
These personal savings accounts would accumulate returns on investments every year, and funds would pay all workers of all income levels much higher benefits than Social Security even promises today.
Because so many Americans will ultimately voluntarily opt for the personal account system, most Americans will eventually be able to self-finance their retirements, drastically lowering the burden on taxpayers.
| Topic | Gingrich | Obama | Romney | The Verdict: Gingrich is Best |
|---|---|---|---|---|
| Strengthening Social Security | Choice between the traditional benefits system and the voluntary opportunity to invest in personal savings accounts. | Maintain existing system and current retirement age, with no savings account option. Maintain existing system, with no savings account option. | Require government-mandated increase in retirement age and means testing. |
Under the Gingrich Plan, any American who wants to enjoy the existing Social Security system will be able to do so. Gingrich also supports creating the option for personal savings investment and insurance accounts, where current workers have the choice to save or invest a portion of their earnings and enjoy the returns in retirement – which historically would be much higher than the benefits paid under traditional Social Security.
The Obama plan maintains the current system, which faces over $15 trillion in unfunded liabilities. The Romney plan maintains this same system, though he implements a higher retirement age and means testing. |
| What will happen to Americans' benefits? |
Empowers Americans with the option to open personal savings accounts, which will provide vastly more in benefits than the current Social Security system.
No means testing. |
Pledges to keep benefits the same for future generations.
No means testing. |
Introduce new means testing formula that will reduce future benefits for upper- and middle-income Americans. |
The Gingrich plan rejects the notion that cutting benefits is the only way to preserve Medicare and Social Security, and will not support means testing that will pare back Americans' hard earned benefits. By unleashing the power of the market, an average-income American who chooses a personal account plan could accumulate over 50% more in benefits than he would under the existing system.
The Obama plan pledges to maintain current benefits in the future, and will also not implement means testing. Instead of creating new wealth and savings by tapping the market power of private insurance and personal accounts, Romney tinkers with the existing system by introducing rationing through means testing. Studies of proposals similar to Romney's would see the benefits for average income Americans being reduced by over 15% by 2050. |
| Vision for Fundamental Reform | Successful models in Chile and Galveston, TX | No information provided | No information provided |
The personal savings account option that the Gingrich Plan offers has a proven track record of success. Chile implemented the model in 1981, and had a whopping 10.2% average annual rate of return on its investment accounts by 2004. Municipal employees in Galveston, Texas created a similar system in the early 1980s, which since then has created double the returns of the Social Security system at a cheaper cost.
The Obama Plan maintains the current system, despite the fact that it holds over $15 trillion in unfunded liabilities. The Romney Plan maintains the current system. However, it requires Americans to wait longer to enjoy their earned retirement benefits, and introduces means testing that rations benefits for middle-income Americans. |
| Government-Mandated Retirement Age | Do not raise the retirement age | Do not raise the retirement age | Raise the retirement age |
Gingrich believes there is no need to raise the current retirement age. Workers who own personal accounts will have control over how and when they retire. Americans will determine their own retirement age, with market incentives to delay it as long as possible. The Obama plan maintains the current broken system, but at least will not mandate a hike in the retirement age. The Romney Plan will instruct Washington to mandate a higher age at which Americans can retire. |
| Payroll Tax | Maintain current rate of 4.2% on employees until the economy recovers, with the ultimate goal of eliminating tax | Maintain current rate of 4.2% on employees | Return payroll tax on employees to 6.2% |
Gingrich supports a personal savings account that would eventually be expanded to finance all of the benefits now financed by the payroll tax, allowing that tax ultimately to be phased out altogether. Presently, he supports keeping the payroll tax on employees at 4.2% while the economy is still weak. The Obama plan maintains the payroll tax at 4.2%. The Romney plan supports returning the payroll tax on employees to 6.2%. |
| Passing along savings accounts to future generations | Yes | No | No |
The Gingrich plan creates full property rights for personal savings accounts. This means that you are completely free to pass along the wealth and savings accumulated in the account to future generations, providing a foundation for a home, a college education, or a business for your children and grandchildren.
The Romney/Obama plan states that regardless how long an individual pays into Social Security, the benefits vanish and cannot be passed along to a spouse and children. |
Newt Gingrich, Gingrich Campaign Press Release - Obama and Romney vs. Gingrich on Social Security Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/298307