Thursday, June 23, 2005
A very interesting idea to reform social security which has a twist on the personal accounts.
Instead of spending this retirement money, the reformers would allow individual workers to divert every surplus Social Security dollar--from now until the extra cash runs out in 2016--into personal retirement accounts.
For the past 20 or so years, the federal government has collected $1.67 trillion more in payroll taxes (and accumulated interest) than it has paid out in retirement benefits to senior citizens. But not a penny of this money has been saved for any worker's retirement
DeMint-Ryan would allow workers to create individual personal retirement accounts and place marketable government bonds worth their portion of the Social Security surplus into these accounts. Think of this as creating 140 million "lock box" accounts, one for every American worker. After three years, workers could trade these Treasury bonds and invest instead in higher-return mutual funds containing a combination of corporate stocks and bonds.
As for the politics, this calls the bluff of Democrats who claim to be the sole protectors of the Social Security trust fund but have done nothing to stop depleting it. Do they want to protect it or not? And by investing only surplus payroll taxes into private accounts, the proposal blunts the (specious but politically potent) attacks from AARP and the left that personal accounts will endanger the program's solvency. The DeMint-Ryan plan enhances solvency by preventing raids on the trust fund, which is a practice that has long infuriated senior citizens.