Unlike the Presidential candidates, at least Swampland is talking about Social Security. Social Security is not a “poor, little, teeny-tiny” program. It takes almost 15 percent of our income and is a $12 trillion unfunded liability. Right now, we receive a paltry single digit rate of return on Social Security, and our children will receive a negative rate of return, according to the Cato Institute. Unfortunately, this issue is dominated by Republicans who don’t dare and Democrats that don’t care (Learn more).
Supporters make it sound like it is a guarantee. What I can guarantee is that Social Security taxes will continue to go up and benefits will continue to decline. I propose we give people the choice to get out of a failing system. This is not about current retirees, this is about our grandchildren.
Let’s go back and look at the Chilean retirement security system. In Chile, workers can actually own their retirement savings. Instead of seeing their payroll taxes disappear into the federal abyss, as in America, workers in Chile have private accounts that they own and control. It’s literally a kind of bank account that contains real investments.
The Chilean system is in stark contrast to America’s, where workers own nothing but an empty promise that a future Congress may or may not provide them with some benefit. (And if you die before you retire, tough luck). In Chile, workers get to invest in real assets. In America, Congress spends the money on other programs and leaves a non-transferable I.O.U. in a safe in West Virginia (quite literally). These I.O.U.’s aren’t like other types of government debt. There’s no secondary market and no investors for them. There are no assets in this “Trust” Fund. Even the courts have ruled that workers have no legal right to any Social Security benefit (See here).
The bottom line here: if you simply gave younger workers and Swampland readers the option of choosing either a Chilean-style personal account or staying in the current Social Security system, I think we’d know which system they’d choose, even if they say something else in public.
And what’s wrong with giving them that choice? Real retirement security means assets that you own, control, and can pass on to your loved ones. Personal accounts allow all Americans to build wealth and join the ownership society by harnessing what Albert Einstein said is the “greatest power on earth”: compound interest. The current Social Security system is about insecurity, dependence on the government, and votes for the Democrat party.
Joe, a word on taxes and equity. This is an important issue in our discussion. We should have a tax code that respects the American people. I have long championed a tax code that is simple, fair, and flat. Everyone would get a $10,000 deduction for every member of their family, no other deductions and loopholes. The family of four that makes under $40,000 per year would pay no tax, and Teresa Heinz Kerry would no longer be able to exploit tax law to only pay 11.5 percent of her $5 million income.
As for your friends’ ‘pay go’ question, please read my Washington Post op-ed, “Where We Went Wrong” and my Wall Street Journal op-ed “A ‘Paygo’ History Lesson” that explains the differences between the two approaches.