David BrodySecretary of Commerce Carlos Gutierrez delivered a speech to a group of students and business leaders in Simon Hall last Thursday, in which he advocated for President George W. Bush’s Social Security proposal.
“What the president is doing is leading us to confront the reality of a Social Security system that is fundamentally unsound over the long haul,” Gutierrez said during his speech. “Social security as we know it today will not be there for our children or our grandchildren. In its present form, it is headed for its solvency and we cannot let that happen…”
Gutierrez spoke about why the current system is inadequate and the Bush administration’s controversial proposal to replace the current Social Security system with personal retirement accounts.
“Some people mistakenly think that [current] Social Security taxes are actually saved in a special account,” Gutierrez stated. “You’ve heard people refer to a Social Security trust fund, which gives the impression that there is a fund of money being accumulated with Social Security taxes. And there is no fund. There are some IOUs sitting in a file in Washington. The money has been spent.”
According to Gutierrez, Social Security will start paying more money to retirees than it receives by the year 2017. In 2027, the system will be losing $200 billion a year, and in 2041 the system will be “insolvent.”
Many Democrats believe that a system based on private accounts will completely overhaul the current system and leave future generations saddled with debt.
Rep. Sandy Levin, the senior Democrat on the House Ways and Means Social Security subcommittee, addressed many of these concerns in the Democratic Party’s weekly radio address on Saturday. He noted that President Bush’s proposal stands in the way of more bipartisan efforts.
Under the current system, once workers reach retirement age they receive Social Security benefits. The program also offers early retirement, disability and survivorship benefits.
The new plan proposes a voluntary system in which persons would divert part of the money they now pay into Social Security to these personal retirement accounts.
“Younger workers put some of their payroll taxes into voluntary personal retirement accounts,” Gutierrez explained. “The idea is to give workers a choice to open a personal account that becomes their own. The money can’t be touched unless they decide to do something down the road.”
In response to a question of how the new system would accommodate those low-wage workers without the capital to invest, Gutierrez responded forcefully.
“The capital comes from Social Security taxes [workers already pay]… I find that argument if not a little bit insulting to be at least very paternalistic. This idea that there are Americans who cannot be trusted with their own money: I think it’s wrong, I think it goes against our values, I think it goes against our beliefs, I think it goes against individual accountability,” he said.
In his remarks to Student Life, Gutierrez emphasized the impact of this new system on young people.
“We think it’s very important for young people to understand these personal accounts and what the president is proposing because it’s really young people who are most affected by the state of the Social Security system,” he said. “Young people are paying for the retirement benefits of the baby boomers, so young people can benefit most from Social Security reform. Or… young people can be impacted the most if we don’t have reform.”
Students in the audience relished the opportunity to hear from Gutierrez, but some thought he could have stepped beyond a defense of the Bush Administration’s plan.
“I enjoyed the speech,” said senior Gautam Ganguli. “It was informative, but he mostly defended Bush’s Social Security plan, even during the Q&A period after the speech.”
Gutierrez did not suggest that the reason for choosing Washington University as his speaking venue was necessarily to reach out to young people.
“We’re speaking in many cities around the country,” he said. “We felt St. Louis was a very important location. The University was just wonderful in opening up and being welcoming and providing a great forum and great facilities and we took them up on the offer.”
Gutierrez was sworn in as the 35th Secretary of Commerce in February. He was born in Havana, Cuba, and came to the U.S. with his family in 1960. Prior to his appointment at the Commerce Department, Gutierrez served as Chairman and CEO of Kellogg, becoming the youngest CEO in the company’s history.