WASHINGTON — Key House Republicans proposed Wednesday to give every worker money to invest in stocks and bonds for retirement to ease the future financial pressures on the Social Security system.
If the investments do poorly, workers would still be guaranteed the full benefits promised them under the current Social Security system.
The proposal is a response to President Clinton's plan for extending the life of the Social Security system. The complex Clinton proposal also uses budget surpluses, government investment in the market and some personal accounts to help finance Social Security when the baby boom generation moves into retirement.
In a preview of election-year rhetoric, congressional Democrats immediately attacked the GOP plan, dimming the chances for a bipartisan deal this year on Social Security.
Under the GOP proposal, every worker gets a personal retirement account that each year would receive a contribution equal to 2% of a worker's salary, up to the maximum Social Security wage base of $72,600 a year. Social Security taxes are levied at 6.2% up to that base, with a worker and a worker's employer each contributing equal amounts for a total of 12.4%.
Under the 2% formula, therefore, a worker earning $50,000 a year would receive $1,000 in the new account. The $1,000 would come not from the Social Security taxes but from the federal budget surplus.
Workers would invest their accounts in stocks (60%) and bonds (40%) offered by private companies but approved by the government for their fiscal soundness. Investment choices could be changed annually, and workers could not tap into their accounts until they reached retirement age or were disabled.
Current levels of Social Security payments would be guaranteed for the future. At retirement, the worker would receive either regular Social Security benefits or a monthly payment from the money accumulated in the 2% retirement account, whichever was larger.
Money to create the 2% accounts would come from future budget surpluses and would cost about $1.8 trillion over 10 years, according to the plan's authors, Rep. Bill Archer (R-Texas), chairman of the Ways and Means Committee, and Rep. Clay Shaw (R-Fla.), head of the Social Security subcommittee.
The proposal, called the Social Security Guarantee Plan, protects benefits "for those already retired, for those about to retire and for all generations to come," said Archer.
