Congressman Paul's position on Social Security is that the program is not constitutional nor solvent and the younger generation should be given the opportunity to opt out of the program. In the mid to late 1980's, Congressman Paul advocated for doing this prior to the baby-boomer generation becoming dependent on the system. While running for President in 2008, Congressman Paul again advocated for allowing young people to opt out of the system.
In 2005, Congressman Paul sponsored legislation to end taxation of social security benefits. He stated that Congress never intended the benefits to be taxed, and they were not considered taxable income until the 1980s. He stated that the main problem with social security is that the money that people pay into the system is not set aside for future use, but rather spent on other items. He has noted that until this deficit spending problem is addressed, social security will never be solvent. He co-sponsored the Social Security Preservation Act to force surplus social security funds to be saved and not spent on other things.
Congressman Paul has noted that social security was presented to the American people as a social insurance program, with individuals paying a monthly “premium” in exchange for retirement benefits later. It was supposed to be a forced savings program, based on the assumption that some people would be unable or unwilling to save for their older years. He notes that there is no Social Security trust fund, and you don’t have an “account.” He has referred to social security as a lottery which is won or lost as a function of when you happened to be born and how long you live to collect benefits. He states that young people today have every reason to believe they will never collect the benefits they have paid for throughout their lives.
In addition to continually warning of an entitlement meltdown on the US economic horizon, Congressman Paul has also moved to address numerous perceived problems within the system. He proposed the Social Security for Americans Only Act to ensure that only US citizens who paid into the sytem would receive social security benefits. He has strongly opposed "Totalization" agreements with countries such as Mexico which would grant social security benefits to Mexican citizens.
As social security is not a designated function of the federal government, Congressman Paul has advocated for allowing younger people to opt out of the system in a form of privatization similar to private accounts. He opposes placing the money into stocks, bonds, or any wall street accessible format. He has not put forth a plan to accomplish this as part of the 2012 presidential campaign.
Taxation of Social Security Benefits
In January of 2005, Congressman Paul issued a press statement noting his support for legislation to end income taxes on social security benefits.
Stop Taxing Social Security!
January 13, 2005
Washington, DC: Congressman Ron Paul recently introduced legislation that would eliminate income taxes on Social Security benefits, giving millions of older Americans a boost in their retirement income and ending an unjust form of double taxation. Paul introduced the “Senior Citizens Tax Elimination Act” immediately after the new Congress convened last week.
“Many Americans don’t realize that Social Security benefits were not taxed until the 1980s,” Paul stated. “When the program was created in the 1930s, Congress never intended to treat Social Security benefits as taxable income. Those benefits are funded by taxes in the first place, so it’s nonsensical to tax them as ordinary income to raise revenue. The whole process is nothing more than a circular subterfuge that allows Congress to reduce Social Security benefits by stealth. Nobody in Congress claims they want to reduce benefits, but that’s exactly what happens when benefits are taxed.”
Under Paul’s legislation, Social Security benefits would not be classified as taxable income nor reported on an individual’s tax return. This is consistent with the ostensible purpose of the system, which is to provide a pension in exchange for a lifetime of payroll tax payments.
“The spending culture in Washington is the real problem,” Paul concluded. “Congress is addicted to spending more than it collects in taxes each year, so it must constantly look for new sources of revenue. That’s why Social Security benefits are taxed, and that’s why the Social Security “trust fund” doesn’t exist-- Congress has raided and spent the money it claimed to be putting aside for your retirement. We can talk all we want about fixing Social Security, but until the spending mentality in Congress changes, every dime you send to Washington will be spent immediately, no matter what the promises. If younger Americans hope to recoup even a tiny percentage of the money they have contributed to the Social Security system, America must vote big-spending politicians from both parties out of Congress.”
Stop Spending
In January of 2005, Congressman Paul used a "Texas Talk" to discuss social security. He stated that the best possible solution was to stop spending.
Want to Reform Social Security? Stop Spending. January 24, 2005
Social Security reform promises to be the biggest domestic issue this year in Washington, but most of the proposals are nothing more than flim-flam. The only honest solution to the future insolvency of the program is for Congress to stop spending so much money. Unless Congress makes real cuts in spending-- and stops spending Social Security taxes on completely unrelated programs-- millions of Americans simply will not receive even a fraction of the money they paid into Social Security. Ignore the rhetoric about tax increases and cuts in benefits, as though you are to blame for the problem! All Social Security obligations could be met if Congress did not spend so much on other things.
In the 1930s, Social Security was presented to the American people as a social insurance program, with individuals paying a monthly “premium” in exchange for retirement benefits later. It was supposed to be a forced savings program, based on the assumption that some people would be unable or unwilling to save for their older years. Seven decades later, however, the ratio of younger working people to older retirees has changed dramatically, exposing the Ponzi-like congressional raid on the system itself. What has not changed, however, is our willingness to accept the notion that the government should force us to save for our older years. Notice that neither political party proposes letting people opt out of Social Security, which exposes the lie that your contributions are set aside and saved. After all, if your contributions really are put aside for your retirement, the money will be there earning interest, right? If your money is put away in a trust fund account with your name on it, what difference would it make if your neighbor chooses not to participate in the program? The truth, of course, is that your contributions are not put aside. Social Security is simply a tax. Like all taxes, the money collected is spent immediately as general revenues to fund the federal government. The Social Security trust fund does not exist, and Social Security “surpluses” are nothing more than an accounting ledger showing that contributions exceeded benefits paid for a given calendar year-- not that the excess was put aside. Social Security benefits are paid each year from general funds, like other federal programs. Since these programs and overall spending keep increasing, the government can’t give up any sources of tax revenue.
Allowing people to opt out of Social Security would force the federal government to admit it has been stealing money from Social Security for decades. The administration speaks of private accounts, but government-managed investment of Social Security funds is not privatization at all. True capitalism by definition operates without government interference, and we should oppose further government involvement in the financial markets. After all, which government officials will decide what stocks, bonds, mutual funds, or other investment vehicles are approved? Which politicians will you trust to decide what your portfolio may contain? Imagine the lobbyists fighting over which special interests will have their favored investments approved for Social Security accounts. Political favoritism, rather than market performance, will determine what investments are allowed, and Social Security in essence will become a huge source of taxpayer-provided investment capital. If the administration truly wants to give people more control over their retirement dollars, why not simply reduce payroll taxes and let them keep their own money to invest privately as they see fit? This is the true private solution. Your money has never been safe in the government’s hands, and it never will be. Governments spend money; it’s just their nature. It is preposterous to believe our government is capable of simply sitting on a huge pile of money without touching it because it’s earmarked for one purpose or another. No matter what politicians promise, Social Security reform will not change the fact that your money is taken from your paycheck and sent to Washington, where it will be spent.
Teachers and Social Security
In October of 2006, Congressman Paul released a press statement noting his support for ending measures that overtaxed teachers on their retirement system.
Paul Urges Social Security Fairness for Texas Teachers Paul Urges Social Security Fairness for Texas Teachers Petition Could Force Congressional Action This Year
October 18, 2006 Lake Jackson, Texas: Congressman Ron Paul recently joined more than 120 of his congressional colleagues in demanding action on legislation that will end the unfair practice of cutting Social Security benefits for Texas teachers.
Many Texas teachers (and other public employees) work for school districts or local government entities that do not participate in the Social Security system. Many of these individuals still qualify for Social Security benefits through their work for other employers, or through their spouses. Upon retirement, however, their Social Security benefits are cut- or even eliminated- based on a federal law that deems their Texas pensions a “windfall.” This is fundamentally unfair, and leaves thousands of teachers with less retirement income than they would receive based on the same earnings with another employer.
“I strongly oppose the current laws that restrict the ability of citizens and their spouses to collect full Social Security benefits just because they worked as teachers, government employees, or railroad employees,” Paul stated. “Furthermore, a retired public employee should not have surviving spouse benefits reduced simply because the surviving spouse was a government employee. Therefore, I fully support repealing the so-called ‘windfall elimination’ provision and the government pension offset. Congress needs to act this year to end this injustice.”
Congressman Paul is an original cosponsor of HR 147, legislation that repeals both the “windfall elimination” provision and the government pension offset in federal law. Paul yesterday signed a “discharge petition,” which is a powerful procedural device in Congress that allows HR 147 to bypass all committees and come directly to the House floor for a vote.
Deficit Spending and Social Security
In October of 2006, Congressman Paul used his "Texas Talk" to discuss the coming retirement of the baby boomers and how deficit spending has robbed the social security trust fund.
Deficit Spending and Social Security October 9, 2006
During a speech in Washington last week, Federal Reserve Chairman Ben Bernanke warned that the coming retirement of the Baby Boomer generation will place tremendous strains on the nation’s budget and economy. He stresses that Social Security and Medicare must be reformed sooner rather than later, because demographic trends make the current system unsustainable over time. In future decades there will be too many retirees and not enough younger taxpayers. Still, the problem seems vague and faraway for most. Today’s seniors hope the system will hold together for the remainder of their lives, while younger working people hope government will somehow fix things before they retire.
Not surprisingly, Congress doesn’t want to face the problem until it becomes an acute crisis. It’s hard to sell voters on austerity today to avoid a relatively distant problem. Politicians usually operate on the opposite principle, by promising great things now and leaving the bills for others to pay later. The only honest solution to the future insolvency of Social Security is for Congress to stop spending so much money. When Congress outspends federal revenues, it raids Social Security funds to cover the difference. Unless Congress makes real cuts in spending-- and stops spending Social Security taxes on completely unrelated programs-- millions of Americans simply will not receive even a fraction of the money they paid into Social Security.
Ignore the rhetoric about tax increases and cuts in benefits, as though you are to blame for the problem! All Social Security obligations could be met if Congress did not spend so much on other things. Congress can begin addressing the problem immediately by cutting at least 5% from other areas of the federal budget every year for the next five years. The budget has nearly tripled just since 1990; surely Congress can find 5% worth of fat to cut each year. When members of Congress vote for bigger and bigger appropriations bills each year, they threaten the very solvency of Social Security. That's why I vote against every wasteful appropriations bill. Social Security contributions are supposed to be set aside from general revenues and placed in a trust fund.
The truth, of course, is that your contributions are not put aside. Over the decades Congress found itself simply unable to sit on a big pile of money, so it began treating Social Security contributions as general revenues to fund the ever-growing federal government. Today your Social Security account is nothing more than a ledger filled with IOUs. I introduced legislation to end this terrible practice. Under my bill, HR 219, your Social Security contributions are set aside in an interest-bearing account and cannot be spent. In other words, your Social Security account would be treated as YOUR account and not a slush fund for Congress. This is the simplest approach to Social Security reform, and it has the added benefit of making it harder for Congress and the administration to mask the deficit spending that is the real cause of our problems.
Demographic Realities and Entitlements
In November of 2006, Congressman Paul used his "Texas Talk" address to discuss the need for entitlement reform for both Medicare and social security.
Demographic Reality and the Entitlement State November 13, 2006
The Government Accountability Office, or GAO, is an investigative arm of Congress charged with the thankless task of accounting for the money received and spent by the federal government. As you might imagine, people who spend all day examining the nitty-gritty realities of federal spending and deficits might not share the voters' enthusiasm for grand campaign promises. David Walker, Comptroller General at GAO, has been on a speaking tour of the U.S recently-- and he pulls no punches when explaining just how precarious our nation's entitlement system really is. He explains that Social Security and Medicare are headed for a train wreck because of demographic trends and rising health care costs. The number of younger taxpayers for each older retiree will continue to decline. The demand for "free" prescription drugs under Medicare will explode. If present trends continue, by 2040 the entire federal budget will be consumed by Social Security and Medicare. The only options for balancing the budget would be cutting total federal spending by about 60%, or doubling federal taxes. Furthermore, Walker asserts, we cannot grow our way out of this problem. Faster economic growth can only delay the inevitable hard choices. To close the long-term entitlement gap, the U.S. economy would have to grow by double digits every year for the next 75 years. In short, Mr. Walker is telling the political class that the status quo cannot be maintained. He is to be commended for his refreshing honesty and unwillingness to provide excuses for the two political parties, the administration, or the even the entitlement-minded American public. I urge everyone interested to visit the GAO website at www.gao.gov, where you can view a report entitled: "Our Nation's Fiscal Outlook: The Federal Government's Long-Term Budget Imbalance." This report should be required reading for every politician in Washington. Are ever growing entitlement and military expenditures really consistent with a free country? Do these expenditures, and the resulting deficits, make us more free or less free? Should the government or the marketplace provide medical care? Should younger taxpayers be expected to provide retirement security and health care even for affluent retirees? Should the U.S. military be used to remake whole nations? Are the programs, agencies, and departments funded by Congress each year constitutional? Are they effective? Could they operate with a smaller budget? Would the public even notice if certain programs were eliminated altogether? These are the kinds of questions the American people must ask, even though Congress lacks the courage to do so. If we hope to avoid a calamitous financial future for our nation, we must address the hardest question of all: What is the proper role for government in our society? The answer to this question will determine how prosperous and free we remain in the decades to come.
Totalization
In January of 2007, Congressman Paul used his "Texas Talk" to address the concept of totalization for social security and illegal immigrants.
Totalization is a Bad Idea
January 8, 2007 Through a Freedom of Information Act Request, a private group recently obtained a copy of a 2004 agreement between the United States and Mexico that will allow hundreds of thousands of noncitizens to receive Social Security benefits. The agreement creates a so-called “totalization” plan between the two nations. Totalization is nothing new. The first such agreements were made in the late 1970s between the United States and several foreign governments simply to make sure American citizens living abroad did not suffer from double taxation with respect to Social Security taxes. From there, however, totalization agreements have become vehicles for noncitizens to become eligible for U.S. Social Security benefits. The new agreement with Mexico would make an estimated 160,000 Mexican citizens eligible in the next five years. Ultimately, the bill for Mexicans working legally in the U.S. could reach one billion dollars by 2050, when the estimated Mexican beneficiaries could reach 300,000. Worse still, an estimated five million Mexicans working illegally in the United States could be eligible for the program. According to press reports, a provision in the Social Security Act allows illegal immigrants to receive Social Security benefits if the United States and another country have a totalization agreement. It’s important to note that Congress, like the American people, heretofore had not seen this totalization agreement. This decision to expand our single largest entitlement program was made with no input from the legislative branch of government. If the president signs it, Congress will have to affirmatively act to override him and in essence veto the agreement. This is the opposite of how it’s supposed to work. There are obvious reasons to oppose a Social Security totalization agreement with Mexico. First, our Social Security system already faces trillions of dollars in future shortages as the Baby Boomer generation retires and fewer young workers pay into the system. Adding hundreds of thousand of noncitizens to the Social Security rolls can only hasten the day of reckoning. Second, Social Security never was intended to serve as an individual foreign aid program for noncitizens abroad. Remember, there is no real Social Security trust fund, and the distinction between income taxes and payroll taxes is entirely artificial. The Social Security contributions made by noncitizens are spent immediately as general revenues. So while it’s unfortunate that some are forced to pay into a system from which they might never receive a penny, the same can be said of younger American citizens. If noncitizens wish to obtain Social Security benefits, or any other U.S. government entitlements, they should seek to become U.S. citizens. Also, totalization agreements allow noncitizens to quality for Social Security benefits by working in the U.S. as little as 18 months. A Mexican citizen could work here for only a year and a half, return to Mexico, and retire with full U.S. benefits. This is grossly unfair to Americans who must work more quarters even to qualify for benefits-- especially younger people who face the possibility that there may be nothing left when it is their turn to retire. Those in favor of sending U.S. Social Security benefits to Mexican citizens argue that crushing poverty in Mexico demands some form of U.S. assistance to that country's aged. While poverty in Mexico truly is deplorable and saddening, the fact remains that Congress has no constitutional authority to enact what is essentially another foreign aid program.
Entitlement Problems
In March of 2007, Congressman Paul used his "Texas Talk" to discuss the need for entitlement reform in both social security and medicare.
The Coming Entitlement Meltdown
March 5, 2007 David Walker, Comptroller General at the Government Accountability Office, appeared on the show “60 Minutes” last evening to discuss the federal budget outlook. If you saw the show, you know that he painted a very sobering picture regarding the federal government’s ability to meet its future obligations. If you didn’t see the show, Mr. Walker’s theme was simple: government entitlement spending is like a runaway freight train headed straight at American taxpayers. He singled out the Medicare prescription drug bill, passed by Congress at the end of 2003, as “probably the most fiscally irresponsible piece of legislation since the 1960s.” When it comes to Social Security and Medicare, the federal government simply won’t be able to keep its promises in the future. That is the reality every American should get used to, despite the grand promises of Washington reformers. Our entitlement system can’t be reformed- it’s too late. And the Medicare prescription drug bill is the final nail in the coffin. The financial impact of the drug bill cannot be overstated. Government projections that the program would cost $400 billion over the next decade were a joke, as everyone in Congress knew even as they voted for the bill. The real cost will be at least $1 trillion in the first decade alone, and much more in following decades as the American population grows older. The Medicare “trust fund” is already badly in the red, and the only solution will be a dramatic increase in payroll taxes for younger workers. The National Taxpayers Union reports that Medicare will consume nearly 40% of the nation’s GDP after several decades because of the new drug benefit. That’s not 40% of federal revenues, or 40% of federal spending, but rather 40 % of the nation’s entire private sector output! The politicians who get reelected by passing such incredibly shortsighted legislation will never have to answer to future generations saddled with huge federal deficits. Those generations are the real victims, as they cannot object to the debts being incurred today in their names. The official national debt figure, now approaching $9 trillion, reflects only what the federal government owes in current debts on money already borrowed. It does not reflect what the federal government has promised to pay millions of Americans in entitlement benefits down the road. Those future obligations put our real debt figure at roughly fifty trillion dollars- a staggering sum that is about as large as the total household net worth of the entire United States. Your share of this fifty trillion amounts to about $175,000. Don’t believe for a second that we can grow our way out of the problem through a prosperous economy that yields higher future tax revenues. If present trends continue, by 2040 the entire federal budget will be consumed by Social Security and Medicare alone. The only options for balancing the budget would be cutting total federal spending by about 60%, or doubling federal taxes. To close the long-term entitlement gap, the U.S. economy would have to grow by double digits every year for the next 75 years. The answer to these critical financial realities is simple, but not easy: We must rethink the very role of government in our society. Anything less, any tinkering or “reform,” won’t cut it. A good start would be for Congress to repeal the Medicare prescription drug bill.
Ponzi Scheme
In December of 2008, Congressman Paul used his "Texas Talk" address to discuss the social security system and note that it functions in a manner identical to a ponzi scheme.
Government and Fraud
Billions of dollars were recently lost in the collapse of Bernie Madoff’s self-described Ponzi scheme, in which too-good-to-be-true returns on investments were not really returns at all, but the funds of defrauded new investors. The pyramid scheme collapsed dramatically when too many clients called in their accounts, and not enough new victims could be found to support these withdrawals. Bernie Madoff was running a blatant fraud operation. Fraud is already illegal, and he will be facing criminal consequences, which is as it should be, and should act as an appropriate deterrent to potential future criminals. But it seems every time someone breaks the law, politicians and pundits decide we need more laws, even though lack of laws was not the problem.
The government itself runs a fraud much bigger than Madoff’s. Our Social Security system is the very definition of a Ponzi, or pyramid scheme. If the government truly had an interest in protecting people’s savings, they would allow people to opt out of Social Security altogether. We would cut wasteful spending, such as our overseas empire, to honor current obligations to seniors, and eventually phase the program out. Instead, as with Enron and Sarbanes Oxley, I expect new, unrelated legislation to be proposed that further damages freedom in the name of protecting us, amidst loud proclamations that they have made the world safe.
Merely passing a law does not fix any problems, just as throwing paper at a recession does not stop it. How can a government so complicit in mandatory public fraud effectively pre-empt private fraud? I see no reason to believe that any new law, or regulatory agency will solve anything. But I do see liberty slipping away every time Congress decides to “do something”. We already have an oversight agency, the SEC, which did a poor job overseeing and preventing this, but does a great job hamstringing honest, productive businesses and driving them overseas.
Total trust in government solutions only creates moral hazard, and amplifies risky behavior. Trust in government got us here. We trusted government to eliminate risk, but it just made risk more creative and dangerous. We trusted the Federal Reserve, a supra-governmental cabal of private banks, to know better than the free market what interest rates should be, and how to stabilize the business cycle, but like a spinning top that loses its balance, it has instead spun the business cycle and the economy wildly out of control.
No governmental activity can negate market forces or nullify the cardinal rule of caveat emptor. Government can however, use our fears against us and promise unrealistic outcomes as a means to consolidate power and erode our liberties. Liberty comes with risk. This is a fact of life. But life without liberty is not much of a life at all.
The only way the American people will get through these difficult times is through our own resilience and ingenuity. At best, the government is irrelevant in finding prosperity again. At worst, government can present a massive obstacle for the economy to overcome. If we do not wise up and rein government back in to its Constitutional limitations, bloated government could be a cumbersome unnecessary weight the economy will continually have to support to stay afloat.
Privatization
Congressman Paul supports returning the control of people's money back to the people. He does not support giving the money to "Wall Street" to invest.
Social Security Preservation Act
In October of 2009, Congressman Paul issued a press statement noting his support for the Social Security Preservation Act.
Stop Bleeding the Social Security Trust Fund! For Immediate Release October 27, 2009
Washington, D.C. - Congressman Ron Paul sent a letter to all Members of Congress today asking them to support his legislation HR 219 The Social Security Preservation Act, which simply states that all monies raised by the Social Security Trust Fund will be used only in payments to beneficiaries or invested in interest-bearing certificates of deposit.
“This year the Social Security trust fund will pay out more in benefits than it takes in in taxes, is only 5 years away from being permanently in the red, and will be totally bankrupt by 2037,” Congressman Paul states.
The letter goes on to point out that despite Social Security’s pending financial crises, big-spending politicians continue raiding the Social Security trust fund to hide the true size of the federal deficit while they create new spending programs at the expense of America’s seniors and taxpayers.
“Whatever long-term Social Security plan you favor, I hope you agree the first step in treatment is to stop the bleeding,” Paul concludes.
HR 219 was introduced in January of this year, has been referred to the Committee on Ways and Means, and currently has 14 cosponsors.
Congressman Paul also used his "Texas Talk" that week to address the legislation and discuss how the government calculates social security payments to lessen them for seniors.
Government Statistics and Lies
There has been a lot of talk in Washington recently about senior citizens, mostly about how various healthcare reform models would help or hurt them. But there is another critical issue that has quietly devastated seniors financially over the last few decades. It concerns how the cost of living is calculated. How does the administration justify not giving a cost of living increase to Social Security recipients this year?
According to the official Consumer Price Index calculation, life has gotten cheaper for the first time in decades. If the government can show statistically that the cost of living has gone down, not up, then they can make the case for not giving a cost of living increase to social security recipients. But does this match reality? Using older calculations of CPI, the cost of living has actually increased – by roughly 5 percent!
The CPI (Consumer Price Index) is a calculation based on the average price of a fixed basket of goods that was initially designed to help businesses adjust for inflation. The government eventually started using it to determine cost of living adjustments for entitlement programs. Couple that with politicians’ discovery that they could raid the social security trust fund to pay for new spending programs, and you have a perfect storm to deny seniors what they were promised, while hiding the true size of the deficit. For politicians, it is a win-win.
For seniors, it is a different story. Economist John Williams of Shadow Government Statistics has estimated that if the original methodology of CPI had not changed, Social Security checks would be nearly double what they are today. This represents a lot of money that politicians have been able to literally steal from seniors, to spend on their own wasteful programs. One example of how they do this is to substitute hamburger for steak, which lowers the average price of that basket of goods. But living on hamburger, or maybe dog food, instead of steak does not represent a constant standard of living. This renders the measurement virtually meaningless, even though politically it comes in very handy.
I have introduced legislation to keep politicians in Washington from ever raiding the Social Security trust fund again. HR 219 The Social Security Preservation Act would assure that all monies collected by the Social Security Trust Fund would only be used in payments to beneficiaries, or be placed in interest bearing certificates of deposit. This would at least stop the bleeding of the fund, and take away some incentive to tease and torture the numbers in order to give seniors the minimal amount. This would also cut off a source of funding for government growth, so it is not likely to get easy support from many politicians.
It is bad enough that Washington imposes high payroll taxes on American workers. The least Congress could do is use the tax dollars for their stated purpose. Instead, seniors will have a harder and harder time trying to survive on a fixed income in an economy based on variables and deception. For them, it is too late to start over. Today’s young people will be forced to pay into the system for years to come. The first step towards solving the impending crisis facing Social Security is to stop politicians from raiding the trust fund and to significantly cut federal government spending.
Questions on Previous Position
Social Security is Not Insurance
In December of 2010, Congressman Paul used his "Texas Talk" to address the fallacy that social security is a pension or forced savings program.
Social Security is not "Insurance"
Perhaps the biggest media story of 2010 was the influence of Tea Party voters on the congressional landscape. The new congress comes to Capitol Hill with a mandate to end profligate spending and restore fiscal sanity, we are told. But when the House and Senate convene in January, the newly elected members will face tremendous pressure to maintain spending levels for entitlement programs. Even the most modest proposals to trim Social Security or Medicare spending will be met with howls of indignation and threats of voter revolt. Legislators who propose any kind of means testing or increased retirement ages can expect angry visits from senior citizen lobbyists ready to fund a candidate back home who supports the status quo.
But millions of Americans now realize that the status quo is an illusion that will not last even another 10 or 20 years. The federal government cannot continue to spend a trillion dollars more than it collects in revenue each year, because we are running out of creditors. Fiscal reality is setting in, and the consequences may be grim even if Congress finds the courage to take decisive action now.
Courage begins with a commitment to see things as they are, rather than how we wish they were. When it comes to Social Security, we must understand that the system does not represent an old age pension, an “insurance” program, or even a forced savings program. It simply represents an enormous transfer payment, with younger workers paying taxes to fund benefits. There is no Social Security trust fund, and you don’t have an “account.” Whether you win or lose the Social Security lottery is a function of when you happened to be born and how long you live to collect benefits. Of course young people today have every reason to believe they will never collect those benefits.
Notice that neither political party proposes letting people opt out of Social Security, which exposes the lie that your contributions are set aside and saved. After all, if your contributions really are put aside for your retirement, the money is there earning interest, right? If your money is in your “account,” what difference would it make if your neighbor chooses not to participate in the program? The truth, of course, is that your contributions are not put aside. Social Security is simply a tax. Like all taxes, the money collected is spent immediately as general revenue to fund the federal government. But no administration will admit that Social Security is nothing more than an accounting ledger with no money. You will collect benefits only if future tax revenues materialize as hoped; the money you paid into the system is long gone.
My hope is that at least some members of the new Congress will cut through the distortions and see Social Security as it really is. The best way to fix the impending Social Security crisis is also the simplest: allow younger individuals to opt out of the program and use their tax savings to invest privately as they see fit. This is the true private solution. Your money has never been safe in the government’s hands, and it never will be.
TEA Party Debate
In September of 2011, Congressman Paul participated in the TEA Party debate in Tampa Bay, Florida. He was asked about social security and stated that he would like to allow workers to opt out of the program.
BLITZER: Congressman Paul, let me expand this conversation. Do you agree with Governor Perry that Social Security is a Ponzi scheme?
PAUL: Well, I agree that Social Security is broke. We spent all the money and it's on its last legs unless we do something. One bill that I had in congress never got passed was to prevent the congress from spending any of that money on the wars and all the nonsense that we do around the world.
Now the other thing that I would like to see done is a transition. I think it's terrible that the Social Security system is in the -- the problems it has, but if people wouldn't have spent the money we would be OK.
Now, what I would like to do is to allow all the young people to get out of Social Security and go on their own. Now, the big question is, is how would the funding occur?
Campaign Website Statements
ISSUE - Social Security
“If all the other members of congress had followed my voting record, the trust fund would be in good shape because I have never voted to spend one penny out of the social security trust fund.”
Our nation’s promise to its seniors, once considered a sacred trust, has become little more than a tool for politicians to scare retirees while robbing them of their promised benefits. Today, the Social Security system is broke and broken.
Those in the system are seeing their benefits dwindle due to higher taxes, increasing inflation, and irresponsible public spending.
The proposed solutions, ranging from lower benefits to higher taxes to increasing the age of eligibility, are NOT solutions; they are betrayals.
Imposing any tax on Social Security benefits is unfair and illogical. In Congress, I have introduced the Senior Citizens Tax Elimination Act (H.R. 191), which repeals ALL taxes on Social Security benefits, to eliminate political theft of our seniors’ income and raise their standard of living.
Solvency is the key to keeping our promise to our seniors, and I have introduced the Social Security Preservation Act (H.R. 219) to ensure that money paid into the system is only used for Social Security.
It is fundamentally unfair to give benefits to anyone who has not paid into the system. The Social Security for Americans Only Act (H.R. 190) ends the drain on Social Security caused by illegal aliens seeking the fruits of your labor.
We must also address the desire of younger workers to save and invest on their own. We should cut payroll taxes and give workers the opportunity to seek better returns in the private market.
Excessive government spending has created the insolvency crisis in Social Security. We must significantly reduce spending so that our nation can keep its promise to our seniors.
Voting Record
Comprehensive Retirement Security and Pension Reform Act of 2001
In 2001, the House voted on a bill that would raise the amount individuals may contribute to traditional and Roth Individual Retirement Accounts and to 401[k] plans and make pensions plans more portable. The bill passed the house in a 407-24 vote but was altered in the Senate. Ron Paul voted in favor of the Comprehensive Retirement Security and Pension Reform Act of 2001.
Ron Paul voted in favor of the Comprehensive Retirement Security and Pension Reform Act of 2001.
Social Security and Medicare Safe Deposit Box Act of 1999
In 2000, the House voted on a bill that would make it out of order to consider a budget that set forth an on-budget deficit for any fiscal year for either the overall budget or social security. In other words, the government could not go into a year with a budget that it knew spent more money than the government took in. The bill failed in a 205-222 vote. Ron Paul voted against the Social Security and Medicare Safe Deposit Box Act of 1999.
Ron Paul voted against the Social Security and Medicare Safe Deposit Box Act of 1999.
Amends title II (Old Age, Survivors and Disability Insurance) (OASDI) of the Social Security Act to require the Managing Trustee of the Board of Trustees of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund (Social Security Trust Funds) to ensure that the annual surplus of the Social Security Trust Funds is invested in: (1) marketable interest-bearing obligations of the United States or obligations guaranteed by the United States; or (2) certificates of deposit in insured depository institutions. Outlines requirements for determining the annual surplus of the Trust Funds. Prohibits disinvestment of Social Security Trust Fund amounts from public debt obligations, any refraining from making such investments, or any delay in making normal deposits in such Trust Funds for public debt limit-related purposes. Authorizes, with certain conditions, the sale of Social Security Trust Fund public debt obligations for the payment of cash benefits and administrative expenses.
Amends title II (Old Age, Survivors and Disability Insurance) (OASDI) of the Social Security Act to repeal: (1) government pension offset requirements applicable to husband's and wife's insurance benefits, widow's and widower's insurance benefits, and mother's and father's insurance benefits with respect to OASDI payments; and (2) windfall elimination requirements with respect to computation of an individual's primary insurance amount.
