News Release

September 13, 2005

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Government Should Use Social Security Surplus to Start Personal Accounts
New reform proposal a responsible first step

WASHINGTON -- It is time to get started on fixing Social Security, argues a new study by the Cato Institute. In "The Personal Lockbox: A First Step on the Road to Social Security Reform," Michael Tanner, Cato's director of Project on Social Security Choice, explains why new legislative proposals are a first step on the road to reform.

The study explains that although Social Security is currently running a surplus, the situation will reverse by 2017, when the system will begin running annual deficits that will ultimately total more than $11 trillion. Every day that Congress fails to act, an additional $200 million is spent rather than being saved for workers' retirement.

Sen. Jim DeMint (R-SC), Rep. Jim McCrery (R-LA), Rep. Paul Ryan (R-WI), Rep. Sam Johnson (R-TX), and others have proposed legislation to rebate Social Security surpluses to workers in the form of contributions to personal accounts. The Senate legislation (S1302) and House proposal (HR 3304, known as GROW for Growing Real Ownership for Workers) are designed to prevent Congress from spending the surplus, which would allow individual workers to save that money toward their own retirement.

Accounts funded from the Social Security surplus can be seen as a reasonable down payment on larger reforms to come. The GROW proposals take the first steps to reform while avoiding many of the criticisms of more extensive proposals, says Tanner.

While emphasizing, that GROW and S1302 are not -- and should not be -- the final word for Social Security reform, Tanner concludes, "These proposals would give workers significantly more ownership, inheritability, and choice than they have under the current system. They may also force Congress to become more fiscally responsible. All in all, they represent a reasonable first step for reform."

A vote on the proposals is expected this fall.

Policy Analysis no. 550