Pallone Discusses Social Security & Federal College Grant Cuts at Forum with Rutgers University Students

New Brunswick, NJ --- U.S. Rep. Frank Pallone, Jr. (D-NJ) hosted a student forum at Rutgers University late this afternoon to talk with students about President Bush's Social Security privatization proposal, and the elimination of several federal college grants in both the president's and House Republicans' budgets that could make affording college more difficult for students coming from lower- and middle-income families.

Pallone realizes that a lot of younger Americans believe that Social Security will not be there for them when they retire in the future. However, the numbers show that's simply not the case. According to the latest numbers from the nonpartisan Congressional Budget Office (CBO), Social Security is solvent until 2052, and after that, the program will still be able to pay 70 to 80 percent of benefits.

"A 20-year-old today, who retires in 2050, should still have access to the same Social Security program that gave his or her grandparents independence in their senior years," Pallone said. "Young Americans cannot be deceived into believing Social Security privatization will leave them better off in their senior years than the current program.

"In fact, President Bush's privatization plan negatively affects younger Americans more than any other age group," Pallone continued. "Consider that a 20-year-old entering the workforce this year would lose $152,000 in Social Security thanks to the more than 40-percent benefit cut needed to pay for the private accounts. A private account is unlikely to make up for this benefit cut because the plan also takes back 80 cents for every dollar in the private account through a 'privatization tax.'"

Pallone told the students the privatization tax stems from the money private account holders will be forced to pay back once they retire. For example, if a 28-year-old man decides today to set aside four percent of his Social Security payroll payments each month into a private account and during the lifetime of that account he accrues a five-percent rate of return, he'd only get to keep two-percent of that and the rest would go back to the government. That's because, under the president's general plan today, the government would take back all the money it gave the individual to invest, as well as three-percent, the average interest Social Security funds normally accrue in government bonds.

The New Jersey congressman also said that while college costs have increased over the last four years by more than $2,300, both President Bush and congressional Republicans appear ready to cut important federal funding that helps ease the sticker shock of college costs. While the president proposed a minor increase of $100 in Pell Grants for 2006, he pays for it by cutting or eliminating other important student aid programs like the Perkins Loan Program and Leveraging Educational Assistance Partnership (LEAP) grants. (SEE "EDUCATION AND THE REPUBLICAN BUDGET" HANDOUT)