Under the guise of increasing benefits for the widows of railroad workers, Congress is considering the Railroad Retirement and Survivors' Improvement Act (H.R. 4844). Supporters claim that this bill will increase benefits while reducing the amount that industry has to contribute to retirement funds. It sounds too good to be true, and it is. Overall, H.R. 4844 would increase federal spending by $3.6 billion between 2001 and 2010 while reducing revenue going into the system by over $3.9 billion. The Congressional Budget Office (CBO) says that this combination and a controversial asset exchange would reduce the budget surplus by $13.6 billion from 2001 through 2010. To make matters worse, this dangerous precedent could very well ruin Congress's chances to pass meaningful Social Security reform. The Railroad Retirement Fund. The Wrong Way to Help Retirees. Testifying about a similar proposal by the Clinton Administration to invest part of the Social Security trust fund in the stock market, Federal Reserve Board Chairman Alan Greenspan warned that such an approach would make it almost impossible to insulate investment decisions from political interference. In short, H.R. 4844's few good features are not enough to repair the problems it would create. The bill would:
Some supporters want to change budget rules to cut the cost of shifting the board's assets from government bonds to private investments. Under this plan, a move by a federal agency would be scored as an exchange of assets, with no budgetary impact. Currently, transfers of government taxes to private investments by an agency or to an account owned by an individual are treated equally--as an outlay or the spending of tax dollars. Changing the rules for an agency would favor the establishment of direct government investment of the Social Security trust fund. This action would have no cost, while setting up personal retirement accounts to help seniors' improve their own retirement savings would be counted as increasing spending. Conclusion. David C. John is Senior Policy Analyst for Social Security at The Heritage Foundation. AuthorsDavid John Former Senior Research Fellow in Retirement Security and Financial Institutions More on This Issue REPORT 11 min read COMMENTARY 3 min read COMMENTARY 3 min read |