Submitted by: David C. Dellinger
If you are interested in permanent fix for the Social Security sustainability problem that should appeal to both the conservatives who want to incorporate investment accounts into the retirement system and the liberals who want to maintain the safety net features of the present system, I suggest that you take a look at the Social Security reform proposal described at my web
The reform proposal there includes:
Investing part (e.g. 25%) of individual Social Security contributions in the equities market to generate a portion of individual retirement benefits. This would allow the Social Security system to take advantage of long-term growth in equity market value (rather than being funded entirely by payroll taxes much as is done by other large private pensions funds.
A unique Income Insurance feature which guarantees a minimum retirement income at or above the poverty line for all retirees who have spent twenty or more years in covered employment. This feature provides protection against poor market performance and low lifetime earnings. It also provides a way of assuring that low income retirees have a livable retirement income without means testing.
An opportunity to make revisions such as allowing married couples to separately draw benefits based on their individual contributions or jointly on their pooled contributions.
A system which retains all the safety net features of the current system.
A sustainable system which would, when fully implemented, operate at a cost significantly lower than current Social Security Contributions by taking advantage of the long term growth in equity markets.
Using projections from an OASDI Trustees Report and historical market performance data, the paper provides a numerical analysis of how the system would operate during and after the transition to the reformed system. The analysis shows that the transition can be made at a cost no greater than that which would be required to extend the life of the present system without depleting the Social Security Trust Fund.
What I particularly like about this plan, is that the fund administrators could, like any savvy investor, buy on corrections—thereby putting a floor under the stock market. One of the reasons I do not care for individually directed SS accounts is savvy investors "stealing" the the stocks of unsophisticated "scared" investors during market slumps. With respect to retirement security—that's just not right. High frequency traders, rapacious short sellers, and momentum traders exaggerate market swings. Now collectively they as a group can be the biggest fish in the pond. If the SS fund came into the market, it would be. I'd actually like to see the Fed go into the market in stealth prior to, and as a proxy for, the SS Fund, so it doesn't miss out on what could be an enormous one-time leg up in the market. Spectacular wealth would be created if 13x earning became 16x, and stayed there. And what would be more poetic than all U.S. workers having a long-term stake in that in the form of retirement security and a prosperous national economy?
There is a very simple but not popular solution. The idiots in Washington can't see past their nose. All you have to do is tax everyone the same. Why should I or a police officer pay more Social Security than Donald Trump, Oprah etc? The very rich SS tax top out at $110,000. They pay approx $6600. $6600 is WAY less than one percent of Trump or Oprah income. What about Baseball players, Football and Basketball players? What about actors and music industry superstars? The poor and middle class pay Social Security. It is time the wealthy pay their fair share to the system. They are the reason the SS can't get their head above water.
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