Kolbe and Stenholm Reintroduce Bipartisan Reform Plan

November 19, 2002

In a news conference held Tuesday, U.S. Representatives Charlie Stenholm and Jim Kolbe reiterated the importance of swift passage of Social Security reform:

"Prior to the 2002 elections, conventional political wisdom held that attacking an opponent on Social Security was always a safe bet for a boost in the polls. However, the election results show that attacking a candidate for supporting personal accounts without offering an alternative doesn't work. The public clearly understands that there is a problem facing Social Security and they want solutions not scare tactics.

We are hopeful that the President will use the momentum he gained from the election to provide leadership on Social Security. We must enact bipartisan, fiscally responsible, and generationally equitable reform early next year. Waiting until 2005 will only make the job harder. By then we will be three years away from the initial baby boom retirement, and it will be virtually impossible to enact reforms without affecting near retirees.

Social Security reform will require genuine bipartisanship. Social Security reform can't pass with 218 Republican votes. There are too many Republicans who won't vote for reform absent some Democrat support. We believe that the legislation we have crafted over the past seven years and the work of the bipartisan commission appointed by the President last year will serve as models for action."

Although the "21st Century Retirement Act" is not new, Kolbe and Stenholm say, "the political climate may be…. The public clearly understands that there is a problem facing Social Security and they want solutions..."

Among the details of the Kolbe-Stenholm legislation:

• Strengthens the Social Security safety net while creating the opportunity for all Americans to accumulate real wealth through individual accounts.



• Restores the solvency of the Social Security trust fund and places the program on a sustainable long-term path that will remain strong in perpetuity.



• Allows workers to redirect 3% of their first $10,000 of earnings and 2% of their remaining taxable earnings ($80,400 in 2001) into their individual accounts.



• Supplements individual accounts for low-income workers - the government would match 50% of the individual account contributions for low-income workers (phased out for workers with incomes over $30,000 a year).



• Uses the Thrift Savings Plan-Plus model for administering individual accounts. Individual accounts would initially be invested in a system modeled after the Thrift Savings Plan. Once a worker's account balance reaches $7,500, they would have the option to choose a private investment institution.



• Makes benefit changes in a progressive manner through benefit formula changes that affect middle and upper income workers, who will benefit the most from the opportunity to accumulate funds in individual accounts.



• Makes changes in the benefit structure which will lift more workers out of poverty than current law by strengthening the safety net for low-income workers. Adds a new minimum benefit and makes the Social Security benefit formula more progressive for low and moderate income workers.



• Corrects the Consumer Price Index used to index Social Security benefits and other government programs as well as the tax code, and recaptures all of the savings from the correction for the Social Security trust fund.



• Makes adjustments in the benefit formula to reflect increases in life expectancy.



• Rewards work by eliminating the earnings test, counting all years of earnings in calculating benefits and improving the actuarial adjustment for early/delayed retirement.

Jerry Daniel Reed of the Abilene Reporter-News writes, "Stenholm and Kolbe's bill would let workers younger than 55 divert 2 percent to 3 percent of their earnings from the Social Security tax into individual savings accounts invested in market securities such as corporate stocks and bonds. The legislation seeks to provide long-term stability to the system by taking advantage of the higher returns that private investments offer compared to Social Security returns on recipients' payroll taxes, [Stenholm] said."

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