Social security is beyond repair.
On a daily basis, political physicians of every stripe applaud China’s savings rates and criticize America’s overconsumption. Unfortunately, most fail to take a deeper look at incentives.
China has no form of socialized pensions, so its citizens must save for their own retirement just as every American did before Franklin D. Roosevelt’s huge expansionary policies of the late 1930s.
These savings represent large pools of loan-able funds for domestic and foreign investment. Meanwhile, across the Pacific, our national government takes money out of every single one of our paychecks to go into an imaginary lockbox until it is then returned to us after retirement age.
The cruel joke here is that, after current Social Security beneficiaries are paid, the remaining money is ‘borrowed’ by the Treasury Department for use in general expenditures. This leaves the economy with no real savings from Social Security, decreased real savings in the private economy and overindulgent federal spending.’
The good news is that U.S. Congress could easily increase long-term domestic savings rates, stimulate the short-term economy and end the worries over Social Security in one fell swoop. A phasing out of the Social Security program could begin with an immediate repeal of the payroll tax.
Current beneficiaries would continue to receive the amounts that are entitled to them under the law, and those who have already earned coverage could be given the choice of accepting a future annuity by the government, discounted by the decrease in future taxes, or the present value of earned benefits in the form of government bonds.
Every worker who has not yet earned coverage would be given a capital sum, in the form of bonds, equal in value to those taxes previously paid by workers or’ their employers. Accumulation of further benefits would then be eliminated, and Americans could save for their own retirement in whatever way they see fit.
While this plan may appear to be hoisting vast quantities of new debt on top of our national government, it actually is not. In truth, it is merely revealing to our Congress its true obligations that remain hidden under the present system.
Although big-government liberals who favor a ‘nanny’ state reject the mere possibility of eliminating Social Security, the passage of such a plan is essential to repairing long term domestic saving and spending habits for individuals as well as our government.
Stephen Christopher is an economics senior and may be reached at [email protected]
