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Social Security is American best-loved government program, but how it works and is financed is almost completely mysterious. Nearly all Americans have an indistinguishable idea that they pay taxes for their benefits and that their benefits are linked somehow to their earnings. Many of the members of social security know that the program is in dilemma and needs to be set up sometime soon to deal with the retirement of the baby boomers. Further than this, their knowledge of the facts is severely limited and often colored by rumors and stories.

The majorities of politicians take advantage of this lack of knowledge and limit their statements on Social Security to platitude and unclear assurance. To cap it all, reformers are likely either to be satisfied with parallel platitudes or to speak in such detail that few outside the policy world can understand what they are saying. The simple fact is that today's Social Security is tremendously complex, and any reform plan that is more than fine words will be similarly complex.

Information in this side-by-side comparison is based on Social Security's scoring memos for each plan and conclusions that can be drawn from information contained in those memos. While there are many good points in the reform plans examined in this analysis. Instead, this comparison provides details of specific plans. However, it would be wise for reformers to follow a set of general principles to ensure that any Social Security reform both resolves Social Security's problems and provides workers with greater retirement security.

This comparison of plans makes no effort to examine whether the Social Security reform plans included in it meet or violate any or all of the principles.

Principles for Social Security Reform:

• The benefits of current retirees and those close to retirement must not be reduced.
• The rate of return on a worker's Social Security taxes must be improved.
• Americans must be able to use Social Security to build a nest egg for the future.
• Personal retirement accounts must guarantee an adequate minimum income.
• Workers should be allowed to fund their Social Security personal retirement accounts by allocating some of their existing payroll tax dollars to them.
• For currently employed workers, participation in the new accounts must be voluntary.
• Any Social Security reform plan must be realistic, cost-effective and reduce the unfunded liabilities of the current system.

Social Security currently pays an inflation-indexed monthly retirement and survivors' benefit, based on a worker's highest 35 years of earnings. Past earnings are indexed for average wage growth in the economy before calculating the benefit. The benefit formula is progressive, meaning that lower-income workers receive a benefit equal to a higher proportion of their average income than upper-income workers receive. The program is expected to continue to collect more in payroll taxes than it pays out in benefits until about 2018.

In judging whether each proposed reform would be better for America's workers, readers may differ sharply. However, while most summaries and studies examine Social Security reform from the viewpoint of federal budget impact, tax rates, and the survivability of the system, few consider the overall impact of reform on the workers it was designed to benefit in the first place. Social Security should not be reformed or saved for its own sake, but only if it more effectively provides the benefits workers need at a price they can afford.
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