Dear Representative McCotter,

On behalf of more than 1.8 million Americans for Prosperity activists in all 50 states, I write in strong support of H.R. 2889, the Save Social Security Act. Your bill harnesses the principles of property rights and individual self-reliance to put Social Security back on a sustainable path, tackling a problem many politicians have shied away from.

As it stands today, Social Security is badly in need of reform. The program promises to bankrupt the country in the coming years. Demographic changes are driving the problem. People are living longer. The first wave of “baby boomers” is starting to retire. Fifty years ago there were 16 workers paying into the program for every retiree taking out benefits; now there are 3. The result: the Social Security Trust Fund is already being depleted, and the program’s actuaries have predicted it will run out of money by 2036. When that happens, Congress will either have to severely raise taxes or renege on promises made to American retirees.

Moreover, in its current form Social Security is a bad deal for workers. Payroll tax contributions fund current retirees’ benefits, and Congress spends every penny of any surpluses (when there used to be surpluses) on unrelated federal programs. Except for those with very low income, a typical worker’s Social Security contributions will come back with returns of just 2 and 3 percent in retirement, far lower than long-run returns on the stock market of 6 to 7 percent. The deal gets worse for young, single people – their returns are only about 1.5 percent. And no one has a say in how the government invests their surplus contributions.

Policymakers have proposed a number of small tweaks to shore up the program, but each proposal has critical downfalls. Higher payroll taxes will hurt job growth, slow the economy, and harm financial markets. Raising the wage cap will cause enormous tax hikes on higher earners, with similar destructive effects. Cutting benefits (e.g. raising the retirement age or reducing COLAs) will only make a bad deal for workers even worse. In short, Social Security simply cannot be propped up in its present form without hurting workers and the economy.

Thankfully, there’s a better way to reform Social Security. Your bill (H.R. 2889) empowers workers under 50 with a choice to divert roughly half of their payroll tax contributions to a personal savings and investment account, where they can save and invest it as they choose at no additional cost. You pay for the transition entirely with sensible spending cuts at the federal level. Harnessing the higher returns on personal accounts, your bill would eliminate all future Social Security deficits while protecting the promises made to current and soon-to-be retirees, all without raising taxes or cutting benefits in the current program.

Critics regularly cite the risk of market investments as a downfall of personal accounts. Better to have a “guaranteed” government payout, even with a lower return, they say (assuming the government can afford to keep its promises). Your bill accounts for this: workers are free to stay with the current Social Security program if they so choose, and forgo the personal accounts entirely. If workers want to take matters into their own hands – perhaps take on some market risk to seek higher returns – they can do so with a personal account. You importantly include a federal guarantee that beneficiaries with personal accounts will do no worse than provided by law under the current program. You preserve the safety net aspect of the program. The important point is that the decision is left up to workers on what to do with their money.

Social Security will bankrupt the nation under its current structure. Instead, giving individuals the power and choice to control their own retirement planning is the true path to prosperity. Americans for Prosperity is proud to support H.R. 2889, the Save Social Security Act. I urge your colleagues to support its passage, and I look forward to working with you in the future.

Sincerely,

James Valvo
Director of Government Affairs
Americans for Prosperity

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