In a memo to House Republicans, Armey warns that Social Security faces an “unavoidable crisis” and makes several important points, among them:
- Social Security currently faces an unfunded liability of nearly $22 trillion, an amount equal to:
3 times the current GDP
7 times the current national debt
11 times this year’s federal budget
75 times the size of this year’s defense budget
750 times the size of this year’s education budget
- The Social Security Trust Fund “is merely an accounting device” that contains no real assets.
- Without individual accounts, the only way to fix Social Security is to raise taxes by 50 percent, drastically cut benefits, or deficit-spend on a massive scale.
- Social Security is becoming an increasingly bad deal for young workers. Armey notes that a worker born in 1960 will receive a rate-of-return on his taxes of less than two percent. Workers born this year can actually expect a negative rate-of- return.
- Social Security is especially unfair to women, African-Americans and the poor.
Armey concludes that only personal accounts create sustainable solvency, increase real rates-of-return, create assets than can be passed on to one’s heirs, and make it possible to reduce payroll taxes over time.