Moderator: Welcome to Viewpoint with our guests, Rep. Jim DeMint and Bob Costello. Congressman, Bob, thank you for joining us. Please get us started by explaining why you feel Social Security needs to be reformed.
Rep. Jim DeMint and Bob Costello: JD: Social Security is America's most important government program and the most important promise to our senior citizens. If changes are not made to the current Social Security system within the next few years, it will be impossible for America to keep this promise to its seniors. Social Security needs to be reformed to save it and to strengthen it. That's why I and a number of my other colleagues in the Congress are developing plans to strengthen the Social Security program.
Florence, Ala.: Why are you messing with Social Security? It is the best program the government has come up with. Leave it alone.
Rep. Jim DeMint and Bob Costello: BC: The key thing is we are facing a demographic time-bomb. In the 1950s, we had 15 workers paying into this system for each retiree receiving benefits. Currently, we have about 3.4 workers paying into the system for each retiree. We are quickly approaching the time when we will have two workers paying into the system for each retiree. The goal is to have a sound retirement system for each generation. If we don't do any type of reform the system will break down. It is necessary to move to a funded system from our current unfunded system.
Moderator: Are other countries facing the same demographic problem with their retirement systems?
Rep. Jim DeMint and Bob Costello: JD: Many countries around the world are facing the same crisis of their Social Security systems. Chile was one of the pioneers in creating personal, wealth-building retirement programs for their workers. Twenty years after its implementation, Chilean workers have created more wealth than a large percent of American workers who earn much higher salaries. Other countries such as Australia and Great Britain have also begun to transition their Social Security pension plans to individually owned accounts.
BC: Great Britain now has over $1.3 trillion in retirement funds, that is more than all the rest of Europe combined. Australia did a reform 11 years ago and it's now probably the most developed country in the world, ready to face the retirement needs of its future generations.
Washington, D.C.: How do I know for sure how much I have earned in the "system?" I have received my statements from the Social Security Administration office in Baltimore twice within the past two years, however, (to me), that document isn't clear and contains a lot of jargon.
Also, I attended a personal finance conference in 2002 and a speaker on Social Security stated that there's some sort of formula that is used to count up the months, years, etc., that one has accumulated in their work history to be able to determine if they are going to get Social Security and how much.
What is that formula? (if you know)? Thanks so much for this needed column.
Rep. Jim DeMint and Bob Costello: JD: Unfortunately, the Social Security statement that has been sent to American workers is misleading and does not provide accurate information about the state of the Social Security system. I have worked with Social Security Commissioner Jo Anne Barnhart to change the report in a way that would give workers the truth about their Social Security Retirement Plan (much like we require of corporate America). The Commissioner has responded with some changes in the report that will be helpful, but we need to continue to revise this statement until workers understand that Social Security is not saving any of their payroll taxes for their own retirement. I have introduced a bill titled Straight Talk on Social Security that will require that this report be changed to tell Americans the truth.
Denton, Texas: I've heard a lot about various legislative proposals to privatize Social Security. What makes Congressman DeMint's bill different from the others?
Rep. Jim DeMint and Bob Costello: JD: My plan creates larger personal savings accounts for lower-income workers and guarantees that no American will ever receive less from Social Security than is promised by the current system. These larger accounts will help poor and middle class Americans create the wealth that they need to be secure in retirement and to leave wealth to their children and grandchildren. My plan allows workers to own their Social Security savings account and to invest it in safe government bonds and conservative, diversified stock funds. Regardless of the performance of these personal savings accounts, my plan assures workers that their retirement income will be at least as good as the current system.
Cleveland, Ohio: Rep. DeMint,
You said in your op-ed that Social Security reform should not cut benefits or raise payroll taxes. But the Social Security system faces a shortfall of $25 trillion in current dollars. How can you make your plan add up? Or would you raise income taxes or other taxes?
Rep. Jim DeMint and Bob Costello: JD: There is no easy way to fix the Social Security system, but my plan will actually save the Social Security system over $15 trillion over the next 75 years. There will be a cost to the transition but by beginning to save part of the current payroll taxes now, we can actually save the program a significant amount of money.
BC: People talk about transition cost, but there really isn't a transition cost. The cost is recognizing the unfunded liability that already exists to keep the promises made. To keep all the promises made to all the retirees moving to a funded system versus an unfunded system will bring us to financial solvency and correct the problem in the long run.
Falls Church, Va.: Dear Sir,
The concept makes obvious sense, but could you help us understand why others might oppose it?
Thank you.
Rep. Jim DeMint and Bob Costello: JD: I believe this is one of the greatest opportunities of our generation. This Congress has the choice to leave the next generation heavily in debt and dependent on the government for their retirement income, or to leave the next generation real wealth and freedom in their retirement. My plan will empower people and reduce the power that politicans have over the people. Consequentially, many politicans who thrive on the dependency of the people will oppose empowering them with real wealth and freedom.
BC: Where is the dignity in the current system where you pay in to Social Security for 40 years and when you come to retirement, you're completely at the mercy of the current Congress of when you can retire and with what benefits? The Supreme Court ruled in 1960, Flestor vs. Nemings, that you have no ownership rights in all the funds you pay into Social Security. Under the reform proposals, you would have ownership over your retirement assets and you would have more control over your life.
America: Why should we trust Republicans to tinker with Social Security?
-Weren't they against it when it passed?
-Aren't they rigging the tax code in favor of the wealthy?
-Aren't they once again trying to bankrupt the country so there is no money to pay for social programs like Social Security, Medicare and Medicaid?
Rep. Jim DeMint and Bob Costello: JD: Saving Social Security should not be a partisan issue. Both President Clinton and President Bush have helped lead the debate toward real savings and personal ownership in the Social Security system. I am currently working with a number of Democrats in the U.S. House to develop plans that work for all Americans. Since my plan has been developed to specifically benefit poor and middle-class Americans, it has gotten the attention of people from all ends of the political spectrum.
Cincinnati, Ohio: What is the cost to the American public if we were to apply reforms today vs. waiting five years? Or in other words how much does it cost America each year we postpone the reform of the system?
Rep. Jim DeMint and Bob Costello: JD: The cost of waiting to reform is huge. The plan I introduced in 2002 with Majority Leader Dick Armey cost $250 billion more this year than it did last year. When people ask, "How can we afford to change Social Security?," I tell them, "We can't afford not to." The price of inaction is simply too high.
BC: The sooner we reform, the cheaper it's going to be. Every year that we don't have real savings starting to compound, we're falling further behind by building a larger unfunded liability. The solution is to have real savings compound over time. That's why it's critical to move to a funded system away from our unfunded system.
Rio Rancho, N.M.: When will Congress and the House of Representatives members come under the same Social Security Plan that the rest of Americans come under? Talk about reform? If you're serious about fairness to the American public ... this needs to be addressed and action taken.
Rep. Jim DeMint and Bob Costello: BC: There's been an e-mail that has been going around that says Congressmen don't have to pay into Social Security. Since 1984, Congressmen have had to pay into the Social Security system like everyone else.
Bethesda, Md.: What happens to the money when someone who retired and died and never collected their Social Security? A lot of people die and don't use the Social Security OR you can't get your husband's Social Security. What happens to the money?
Rep. Jim DeMint and Bob Costello: JD: For someone who dies just before retirement or just after retirement, the lifetime payments they made into the Social Security system stay within the Social Security system and pay other people's benefits. The government does provide a small amount of money to survivors, but nowhere near what the worker had paid into the system. This issue of inheritability, of leaving wealth to your children is of critical importance to any reform proposal.
BC: Again, the key to reform is ownership and building wealth. Before we talked about this issue should not be a partisan issue. One of the key reasons that Former Democratic Senator Pat Moynihan supported reform with personal retirement accounts was the whole aspect of building wealth for lower-income and average Americans.
Sterling, Va.: I read in a report that an increase of 0.5 percent in the tax rate now would generate enough additional revenue to bring Social Security solvent before the surplus erodes. Wouldn't that be more financially responsible than spending $1 billion to transition to private accounts?
Rep. Jim DeMint and Bob Costello: JD: Eventually it will take a payroll tax increase of 5 percent to cover the additional costs of the system as is, over the next 75 years. The costs will be significantly higher than $1 billion that you refer to. But the government will have to come up with this money regardless of whether or not changes are made. And I believe ownership, independence, and access to wealth are better than the current system that doesn't provide these benefits.
BC: The Social Security Administration has only certified long-term solvency through reform with personal retirement accounts. If we don't move from an unfunded system to a funded system, you won't get to long-term solvency. If you keep going down the path of payroll tax increases, you're going to be destructive to the labor markets in America. As payroll taxes increase, you're going to give higher incentives to businesses to be more capital intense and more likely to move jobs overseas.
San Francisco, Calif.: The collapse of the stock market over the past few years would have destroyed the future of retired Americans who would not have had Social Security to depend on. Even the safest stocks in the stock market were battered. Why are you asking people to gamble their futures on a sucker's bet?
Rep. Jim DeMint and Bob Costello: BC: This reform is not about putting money in the stock market. It's about putting money into real savings. Senator Tom Daschle said this would be a terrible time to be retiring if you had your Social Security funds and personal retirement accounts. The Senator doesn't understand retirement investing. The old rule of thumb is you take the number 100 minus your age and that's the maximum amount you should have in the stock market of your retirement funds. So if you were close to retirement, you should have most of your retirement funds in fixed income and CDs. You would have made more money in your bond portfolio than you would have lost in your stock portfolio, if you would have followed standard retirement guidelines.
JD: I think it's important to understand that there's a difference between investing in the short term and investing in the long term. Under my proposal, workers could only invest in broadbased index funds that mirror the rate of return the market sees over decades. If you would have invested 40 years ago and retired even when the stock market was at the bottom in the past three years, you would still have more money than what the current Social Security system would be able to pay you over 35 years of retirement.
Boise, Idaho: Rep. DeMint: "There will be a cost to the transition but by beginning to save part of the current payroll taxes now, we can actually save the program a significant amount of money."
And how do you propose paying for that transition cost? It's not like we have any budget surpluses any more.
Rep. Jim DeMint and Bob Costello: JD: You raise a fair question. First, the government will have to pay for this through the General Fund, however, the government can also do other things like exercising financial discipline. But more importantly, would you rather spend $7.8 trillion over the next 75 years or would you rather spend over $25 trillion? That is the difference between reforming the system now and doing nothing.
Florence, S.C.: I have 401(k)s, IRAs, etc., to help me during retirement. What exactly is wrong with the level of benefits that are currently being paid out under the Social Security plan?
Rep. Jim DeMint and Bob Costello: JD: The average yearly Social Security payment is about $10,000, which is also what the current poverty level is. I believe that workers should be able to have more than just enough money to pay for next month's rent or next month's heating bill. They should have the opportunity to have money left over and either give it to their children or be able to truly enjoy their retirement.
401(k)s and IRAs are a great investment tool, however, a large number of America's workers never have access to these investment tools. Personal Social Security retirement accounts would be the only way these workers would ever be able to invest and build wealth.
Moderator: Bob, who is Social Security Choice.org? Also, if people agree with the need for this reform what can or should they do?
Rep. Jim DeMint and Bob Costello: BC: We're a national grassroots organization that is dedicated to educating the public on the need for reform and modernatization of the Social Security system. We were only started about eight months ago. It's important that if people want to be informed on this issue, there are a lot of sources out there that are available to be become more informed on Social Security. I would encourage them to contact our Web site for two reasons. There is a lot of information there and a lot of links on this issue. But secondly, if they want to be informed on specific votes coming up in the House and Senate committees on this issue, they can sign up at our Web site to receive updates regarding developments on the reform front.
Rep. Jim DeMint and Bob Costello: JD: I want to thank washingtonpost.com and Bob Costello with Social Security Choice.org for hosting this event. I think this is a great opportunity for regular Americans to be able to ask the serious questions that need to be addressed regarding Social Security. This system, more than any other, affects every American and I am pleased to be able to participate. I am sorry that I did not get to answer all the very thought-provoking and detailed questions. Hopefully they will be answered in the coming events. Social Security is a crucial part of securing every American's future. Thank you for having me.
BC: Congressman DeMint, I want to thank you for joining us today. It's great to have a real leader on this issue who's working hard to address this problem that is facing our country. I want to thank everyone for their questions; I do wish we had more time to answer more of them. If this issue is important to you, please stay in touch with us at www.SocialSecurityChoice.org. In fact, if you have questions that weren't answered, please submit them to our Web site. We look forward to hosting more educational forums like this. In the very near future, we expect to do another Viewpoint discussion with another leader from the Hill on this issue, Congressman Pat Toomey from Allentown, Pa. Again, to close, this debate is about choice, ownership, and building wealth for all Americans. We need all Americans to participate in this discussion and together we can hopefully work to build a sound retirement system for each generation of Americans.
Moderator: Our thanks to Rep. Jim DeMint, Bob Costello, Social Security Choice.org and all who participated.
Social Security reform with personal retirement accounts is Social Security choice. Rep. Jim DeMint, an advocate of this reform, believes current retirees and those nearing retirement should receive every penny of their promised Social Security benefits: they paid for their benefits and they should receive them. But he also believes younger workers should be given the choice of investing their Social Security taxes in personal retirement accounts. Personal ownership and control of Social Security savings will bring better returns and reduced risk, DeMint feels, and the goal is to have a sound financial retirement system for all Americans. He believes this reform is about ownership, choice and building wealth for all Americans. Rep. DeMint was online to answer questions along with Bob Costello, president of Social Security Choice.org. 
