Presidential candidate and current Texas governor Rick Perry suggests that the Social Security Administration should adapt its services to private accounts. What does that mean? He's talking about privatizing Social Security. Former President George W. Bush also attempted to privatize Social Security in 2005, without success.
Candidate Perry assured current Social Security Disability beneficiaries, as well as those who are trying to apply for disability benefits, that such reform plans won't have much of an effect on their benefits, but that private Social Security accounts should be offered or designated as retirement accounts for others (meaning those who are now in their 20s and 30s). Governor Perry considers Social Security a failure, at least according to comments he's made during recent Republican debates.
What would this mean for your Social Security Disability benefits and for potential Social Security Retirement benefits for today's 25 to 35-year-olds? It means that Americans' retirement funds would be privatized. According to Perry, the benefits of such accounts would, "give younger workers the option to own their Social Security contributions through personal retirement accounts that Washington politicians can never raid. Because young workers will own their contributions, they will be free to seek a market rate of return if they choose, and to leave their retirement savings to their dependents when they die."
Downside to Privatization
How would it hurt to privatize Social Security? Privatizing Social Security accounts would leave those accounts open to losses based on financial and economic crises, much like millions of citizens lost their retirement savings and a bulk of 401(k)s were decimated by the recent recession.
Privatizing Social Security has been rejected more than once, and quite loudly, by Americans, and for good reason. However, at the other end of the spectrum, Governor Perry is also suggesting eliminating tax on Social Security benefits, which may help reduce taxes on those who continue to work and earn additional income while collecting Social Security benefits.
Arguments against the privatization of Social Security include that by privatizing Social Security, Social Security Disability benefits will be reduced by as much as 44% below 2005 levels.
In addition, costs for such a transition would be expensive, costing an estimated additional $1-$2 trillion of taxpayer money. Private accounts would reduce the number and type of special insurance options, including disability and survivors insurance currently that are currently provided by Social Security. Add to that the fact that Social Security funds would be privately invested in the stock market and some people don't even want to consider such an option today.
The bottom line is that Social Security taxes are balanced against wage earners of all levels, and private accounts would likely create disproportionate returns, allowing those who make higher wages to invest in higher-yield investments than those earning lower incomes.
While there is no doubt that the Social Security Administration is seeking remedies to the system today, privatizing Social Security is not, according to the voice of the American people, a viable treatment option.