Rep. Smith Introduces Retirement Security Act

September 15, 2003

Rep. Nick Smith (R-Mich.), long-time champion of Social Security reform and former chairman of Bipartisan Task Force on Social Security, reintroduced his Retirement Security Act at a press conference on Wednesday, September 10. The legislation details three specific goals: provide retirement security for the elderly, give young people an opportunity to improve their retirement prospects, and benefit the economy instead of burdening it.

Smith's press release states: "This year we will spend $475 billion on social security. By 2017 it will be $734 billion and payroll taxes will not cover benefit payments. Without change there will be a $127 trillion shortfall this century. The current system simply cannot support itself. Our bipartisan Retirement Security Act solves this problem."

People choosing to participate in the voluntary account program would continue to receive benefits directly from the government. Those benefits would be offset on the basis of the amount of money deposited into their accounts, not the amount of money earned in the accounts. This means that workers, on net, could expect to earn more from this offset with market interest.

In an introductory column, Smith writes: "My bipartisan Retirement Security Act has been evaluated by Social Security's actuaries, who have determined that it will fully restore its solvency. Workers could voluntarily devote 2.5 percent of their income from their payroll taxes. Workers would own the money in the accounts, which can be put in well-diversified investments deemed safe by the Secretary of Treasury. The government would supplement the accounts of low-income workers to help them build up savings for retirement." The accounts would reach 8 percent of income by 2075.

The Smith bill, as do other personal account proposals, has provisions that systematically correct the bias against working women. Instead of losing all contributions to Social Security when opting for a spousal benefit, lifetime account contributions would be pooled and then divided equally between husband and wife. This also restores proportionate benefits for divorcees who otherwise would not be eligible for spousal benefits because of the 10-year marriage requirement.

At Wednesday's press conference, cosponsors Rep. Jim Kolbe (R-AZ), Rep. Charles Stenholm (D-TX), and Rep. Jeff Flake (R-AZ) voiced their support for Smith's legislation. Steve Moore of the Club for Growth, along with representatives from 60 Plus Association, National Council for Policy Analysis, United Seniors Association, Americans for Tax Reform, National Taxpayers Union, Alliance for Worker Retirement Security, and American Shareholders Association, made statements urging action on Social Security.

Smith leaves office after 12 years in Congress but hopes that his latest attempt to alter Social Security's path to bankruptcy will encourage other members to continue with the Social Security debate. He introduced his first Social Security legislation in 1994.

For more about Rep. Smith's personal retirement account—based Social Security reform plan, click here.

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