A Progressive Proposal for Social Security Private Accounts
by Peter Ferrara on 06/13/2003
23 Pages
A well-designed personal account option for Social Security would be substantial, highly progressive, and would provide a broad range of benefits for working people, including the following:
- Workers would enjoy personal ownership and control over their retirement funds.
- Workers would receive much better returns on what they and their employers pay into the system and substantially higher retirement benefits than the current Social Security system promises, let alone what it can pay.
- Low-income workers, minorities and women would receive much higher returns and benefits through these personal accounts than through the current Social Security framework.
- Personal accounts would offer low- and moderate-income working people their only real chance to accumulate substantial savings and wealth. This would result in broader and more equal ownership of wealth and capital.
- Since private capital market returns are so much higher than what Social Security can pay, the required payments into personal accounts can be substantially less than what Social Security currently demands. This would effectively amount to the largest tax cut in world history.
- The reduced tax burden and higher savings and investment resulting from personal accounts would substantially boost economic growth. This would result in more jobs, better jobs, and higher wages and overall income.
- To the extent workers choose personal accounts to provide their Social Security coverage, the Social Security financing crisis would be eliminated, without cutting Social Security benefits or increasing Social Security taxes, as workers rely on fully funded personal accounts for their benefits rather than upon the older Social Security framework.
- In the process of transition to a system of personal accounts, the unfunded liability of Social Security, which is three times the reported national debt, would be eliminated. This would amount to the greatest reduction in government debt in world history.
The public understands all of this. Polls show very broad and strong support for personal accounts, and politicians, including the President of the United States, are already running and winning elections on this issue.
What is needed now is a specific reform plan that delivers on the promise of personal accounts, providing all of the benefits discussed above. This study offers just such a reform plan.
The personal account plan described in this study will accomplish all of the above and will completely eliminate the Social Security deficits over time, without Social Security benefit cuts or tax increases. It is a plan upon which fiscal conservatives and social liberals, Republicans and Democrats, and homemakers and policymakers can agree, for the betterment of all Americans.
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