November 5, 2004 - Both the President’s party and the Democratic Party are agreed that the method of financing the Social Security System is in urgent need of reform. We have made a contract with American working men and women that if they worked hard, played by the rules, and paid a mandatory contribution out of each paycheck the United States would insure that they were able to live in dignity and free from want when they were no longer able to work. The system has served our grandparents and our parents well for nearly seventy years. Like all insurance programs benefits paid to qualified beneficiaries have come from the participants FICA contributions to the Social Security Trust Fund and the Fund’s investment income. Changing demographics are such that the FICA deductions from the paychecks of active American workers are no longer adequate to fund the benefits that retired workers have earned by their lifetimes of labor.

The President’s party proposes to cure the system by dismantling it. They would permit the worker to set aside a portion of that mandatory paycheck deduction to be deposited into a separate individual investment account – a mandatory IRA – invested in the private market free of restrictions requiring the Social Security Trust Fund to be invested in instruments backed by the full faith and credit if the United States. The creation of the individual investment account will result in a reduction of the funds flowing into the Social Security Trust Fund from which Social Security Benefits can be drawn. That reduction in funds must of necessity result in an accompanying reduction in the amount that individual beneficiaries can expect to draw. We cannot strengthen the Social Security System and keep our obligation to those who have spent a lifetime serving America’s industry and commerce by dismantling the system and privatizing it.

Our grandparents created the Social Security System because they recognized that the whole of society was benefited when it guaranteed to American workers freedom from desperation and want; when the whole of society shared in the obligation to provide for those who were no longer able to provide for themselves. The system they created shared the burden of providing for old age equally between the worker and the employer through the flat rate payroll tax. Advances in medical knowledge and the freedom from want that the Social Security system has come together to extend the average life expectancy of Americans far beyond that of 1936. The coming crisis in Social Security is not the consequence of a system that has failed but rather the result of a system that side by side with Medicare has worked too well.

We Democrats recognize that all of society; not just employees, employers, and entrepreneurs; benefits when older Americans are insured against lives of quiet desperation. We recognize that the obligation to contribute extends as well to those whose incomes are derived not from wages but from investments, real estate rentals, trust funds and other unearned income. We call for the FICA tax rate to be reduced to a combined 6.0 % divided between the employer and the employee and in the case of self-employed entrepreneurs or non-employed investors paid entirely by the taxpayer. We call for the FICA tax to be applied to all income without regard to its source and with out a cap. We call for the end to double taxation by making FICA taxes deductible from taxable income for the individual taxpayer as well as the employer and for an end to Federal Income Taxes on the benefits received by individuals.

Our program will strengthen the Social Security Trust Fund and enable the Social Security Administration to fix and distribute benefits based upon 21st Century actuarial realities, not those assumptions of decades ago. We are committed to keeping our common promise to insure older Americans against deprivation and want.