Gingrich wants Americans to have option of personal Social Security account

By Shira Schoenberg, Globe Correspondent

MANCHESTER, N.H. – Former Republican House Speaker Newt Gingrich laid out a plan today that would give Americans the option of having a personal Social Security account – a proposal similar to the partial privatization that President George W. Bush proposed in 2005.

Bush was unable to get the idea past opposition from members of both parties. But Gingrich said if he is elected president, he expects better results. “I wouldn’t make it my program,” Gingrich said. “I’m not going to go around the country trying to sell it. I’m going to try to get hundreds of thousands of young people through social media to decide that it’s their program.”

A new poll out today from USA Today and Gallup found Gingrich and former Massachusetts Governor Mitt Romney tied for the lead in the presidential race, with Gingrich at 19 percent and Romney at 20 percent among Republicans nationwide. Gingrich has tried to portray himself as an intellectual candidate with bold ideas, and the plan he laid out for Social Security would be a radical departure from the current system. Gingrich, speaking at the New Hampshire Institute of Politics at Saint Anselm College, said the plan would let people control their own retirement investments, while guaranteeing a minimum level of benefits. It would be voluntary.

“If you are dumb enough that you prefer to get less money with less control while relying on politicians, that’s your prerogative,” Gingrich said. “You’re an American. You’re allowed to be dumb.”

Gingrich said his plan is similar to those already in effect in Chile and in Galveston, Texas. It is based on models laid out in bills proposed by Wisconsin Representative Paul Ryan and New Hampshire Senator John Sununu in 2005, and by Michigan Representative Thaddeus McCotter this year.

Currently, employees and employers pay into the Social Security system through the payroll tax. Under Gingrich’s proposal, the employer-funded portion would go toward keeping the current Social Security system sustainable. But part of the employee-funded portion could be invested in a personal savings account. People would be given the option of putting money into a range of investments administered by private companies, similar to a 401-k plan. The person would own his account, which would be passed on to his estate when the person dies.

Gingrich said in addition to giving people more ownership over their retirement benefits, it would help the economy by spurring investment through the private savings accounts. “The amount of savings builds up rapidly and creates a level of capital which accelerates economic growth,” Gingrich said.

Gingrich adviser Peter Ferrara, a conservative lawyer who served in the administrations of President Reagan and President George H.W. Bush, said Gingrich has not yet determined what portion of a person’s payroll tax they could contribute, or for what ages the program would be phased in. But Gingrich said current beneficiaries would not be impacted.

To pay for the transition period, Gingrich would take 185 federal programs that help the poor and give the money – including Medicaid money - as block grants to the states. Gingrich said that would eliminate federal bureaucracy and let states come up with training programs to get people off social programs. “We want to challenge the states not to figure out how you can take this federal block grant to subsidize the poor being poor, we want them to take this amount and use it to figure out how you can help the poor learn to be non-poor,” Gingrich said.

In a report posted on Gingrich’s website, Ferrara estimated that switching to block grants could save the federal government $3.25 trillion over 10 years and the states $1.4 trillion.

But Gingrich’s plan would be enormously controversial, particularly as Americans have seen the volatility of the stock market in recent years. Terry Lochhead, an organizer with the Alliance for Retired Americans, said analysts are projecting that the stock market will continue to roll up and down. “If individuals could choose a private account, they would be subject to the ebbs and flows of the market,” Lochhead said. “They’re at risk.”

Lochhead said those who choose to stay in the current Social Security system would also be put at risk, as employees paying into the system leave for private options. Lochhead said the only beneficiaries of the plan would be the money managers. “Management fees would be great for Wall Street,” she said.

Details of the Gingrich plan are available here.