Students concerned about a Social Security system that economists say will go bankrupt in less than 35 years may see a ray of hope with the release of a new plan developed by a top University official.
School of Public Policy Dean Edward Gramlich chaired a 13-member social security advisory committee that released its report to Congress this month. The group, which has met for the past two years, divided and devised three different proposals designed to reinvent Social Security and save it from bankruptcy.
Gramlich's plan would privatize Social Security and tax an extra 1.6 percent of workers' income. That additional tax revenue would be placed in individual retirement investment accounts.
"I tried to fashion a plan that uses the stock market somewhat, but also has balance," Gramlich said.
Gramlich's plan would give slight decreases in benefits to the wealthy.
The plan has received the support of many University faculty members.
"The reason I support his plan is because of the low costs," said Social Work Prof. William Birdsall. "If Gramlich's plan will get in, the person who is 18 years old will get a positive net gain for entering the work force."
Others prefer Gramlich's plan because they said it is not very radical and helps the poor.
"I liked Ned's plan because it would preserve the progressivity of Social Security," said Public Policy Prof. Mary Corcoran. "It will help lower-income people more, and I liked that."
However, some view Gramlich's plan as just an additional federal income tax.
"It essentially imposes another payroll tax on working Americans," said Michael Tanner, director of the social security privatization plan for the Cato Institute, a conservative Washington think tank. "The government control of the funds is sub-optimal."
Gramlich acknowledged that there are cuts in benefits, but he said such cuts are necessary.
Tanner said he supports the personal securities plan, which would place more than three-quarters of income taxes in individual investment accounts.
"That is the closest to full privatization," Tanner said.
The final and most traditional plan would maintain the current benefits but place a tax on them. The government would then invest tax revenue in the stock market. Tanner said he would prefer Gramlich's plan over this plan because it is "one more step to socialization."
Gramlich said his plan will most likely "appeal to centrist Democrats and centrist Republicans." Gramlich said his plan has not been well received by labor unions because of the cuts in benefits.
Congress is not expected to decide on a plan anytime soon.
"I wouldn't look for anything before the end of the congressional session," Gramlich said. "It's going to be a slow process, and it ought to."
However, Gramlich said a plan should be passed within 11 years - before "baby boomers" begin to retire.
"If you let the baby boomers go into retirement before a plan passes, that will water down what the plan will accomplish," Gramlich said.