Two Paths to Social Security Investment Accounts Mapped

"benefit cuts" vs."no benefit cuts" GOP private accounts ideas.

http://www.latimes.com/business/la-na-accounts30jan30,1,5213039.story?coll=la-headlines-business

Two Paths to Social Security Investment Accounts Mapped
Each builds on the president's proposal of private accounts, but they differ on how much could be invested and on the cutting of benefits.
By Joel Havemann
Times Staff Writer

January 30, 2005

WASHINGTON —<snip> The private accounts in the commission's proposal could be enlarged by raising the maximum amount workers could invest. Ryan's plan, based closely on Ferrara's approach, includes a diversion of 10% of the first $10,000 of income and 5% of additional income up to the cap (now $90,000) on wages subject to the payroll tax. Typical workers would be able to put more than half of their Social Security payroll tax — 6.4 percentage points — into the private accounts.<snip>

Because wages have risen an average of 1 percentage point a year faster than prices, this change, when fully phased in around the middle of the century, would slash benefits by nearly half from those promised by current law. Although benefits would still keep up with price inflation, they would grow progressively smaller as a percentage of wages earned when retirees were working.<snip>

Rep. Ryan argued that benefit cuts would be rendered unnecessary by a combination of across-the-board government spending caps and the tax revenue from the economic activity generated by investments through the private Social Security accounts. The important thing, he said, is to get the accounts started.<snip>