In the course of a day, I usually receive notice of a dozen or more articles pertaining to my political hot buttons. Today, one of those referenced an article by the Business Columnist for the Washington Post, Allan Sloan. The article was titled,
Bush’s Social Security Sleight of Hand. In it Sloan tries to make it seem like Bush’s personal accounts proposal for Social Security will cost the country money — end of story. He provides as Exhibit “A” the shocking fact that beginning in 2010, the Bush 2007 budget proposal provides 2010 expenditures of $24 billion allocated for “privatization costs,” $57 billion in 2011 and an average of $71 billion over the next 10 years.
Sloan never mentions the benefits of personal accounts such as lessening the load on Social Security at a future date or providing better retirements for our elderly, but I have a bigger criticism. The criticism applies to Bush’s plan and by extension, to Sloan’s failure to point it out. That criticism is that these personal accounts are anything but personal. They are not privately held. This little detail is only alluded to, at whitehouse.gov, but what else can this statement mean — “The money would go into a conservative mix of bond and stock funds that would have the opportunity to earn a higher rate of return than anything the current system could provide.” How would the government know what mix of investments I would put my retirement funds into? The way it is worded allows for the wiggle room of the government not being the custodial trustee, but pardon me for suspecting otherwise.
There is a better way. Current IRA rules allow a wide range of investments and are held in private accounts and they don’t require billions of dollars of government expense. Holding Personal Retirement Accounts (PRA’s) privately could be accomplished in a similar manner.
Here is what I would propose. I think it is simple and would work. The big problem with Social Security is the upcoming reduction in number of workers per retiree. The fewer Social Security recipients we have, the better. Therefore, for each dollar of income a PRA account generates annually, reduce the Social Security benefit by 25 cents, and make the PRA income non-taxable. For people with significant assets who are retired or soon to be retired, this would provide an immediate benefit. For people not yet in retirement, the incentive would be completely tax-free retirement money but they would still be contributing to Social Security in the meantime to support those who do not participate. When enough people have opted out of the system, start building a true Social Security fund by investing the excess into that moderate mix of bonds and stocks the President suggested for personal accounts. Eventually, the fund would be self-perpetuating with little or no additional Social Security contributions required to provide for those who were unable to provide their own retirements for whatever reason. Then we could work on paying down the national debt.
This proposal is what I consider a compromise because taxes are legal theft by the government. If you would like to see an elegant flash animation that illustrates why, check out Lux Lucre’s The Philosophy of Liberty at the International Society for Individual Liberty website. In as much as most people are lousy money managers and completely doing away with Social Security would violate promises made to citizens and would never gain enough political support, I say this alternative is a compromise everyone can live with.
jeffersonish