I was excited when I saw that Professor Martin Feldstein of Harvard University had a column in yesterday’s Wall Street Journal entitled, “Private Accounts Can Save Social Security.” This is great, I thought, another person advocating the kind of pro-growth, pro-freedom reform which has taken hold in about 30 nations all over the world.
Imagine my disappointment, then, when I read the column and discovered that Feldstein had unfurled the white flag. Instead of genuine reform, which would allow workers to shift their payroll taxes into personal retirement accounts, he wants everyone to remain trapped in the current system and then require individuals to pay extra into some sort of retirement account.
Social Security taxes are not to be invested in the stock market… Here’s how such a system might work. Each individual would designate a broad-based mutual fund from a large list of funds approved by the government. The designation could be done on the individual’s annual tax return and could be changed once a year. Employers and the self-employed would send an additional few percent of wages to the Social Security Administration each month in addition to the current payroll tax. The Social Security Administration would then forward those dollars to the mutual fund chosen by the individual. …The automatic extra payroll deduction could start with a less disruptive 1% or 2% and grow as high as 5%. Since every individual would have the option of requesting a refund of that payroll deduction on the following year’s income-tax form, the extra saving is strictly voluntary.
The only good news is that Feldstein would allow workers to recapture the money they are forced to put in these new accounts, so technically this is not an Obamacare-style mandate. Or, perhaps the right description is that it is a mandate, but with an escape hatch.
The right approach is to let workers shift their payroll taxes into a personal account. This video describes why this type of reform is the right approach.
I am totally agree with your views.Social Security is a comprehensive federal program providing benefits to workers and their dependents in the form of retirement income, disability income, and, potentially, other forms of payments.For the awesome info I’ll be back for sure. Thank you!
The Social Security Administration itself, which concedes that the long-term liability of the system is nearly $10 trillion. Personal Accounts Bring Solvency The worst way to “solve” this crisis is to raise the payroll tax, which would amount to an enormous marginal income-tax-rate hike for middle class workers. Nice Post.
[…] on a roll, but not in a good way. Earlier this week in the Wall Street Journal, he advocated throwing in the towel on reforming Social Security into a system of personal retirement accounts. Today, in the New York Times, he endorses big tax […]
[…] on a roll, but not in a good way. Earlier this week in the Wall Street Journal, he advocated throwing in the towel on reforming Social Security into a system of personal retirement accounts. Today, in the New York Times, he endorses big tax […]
I am 66, and I’ve been getting SS payments since age 62. Using your percentage of 12 percent payroll tax, and using only my final work year as my salary for my entire work life (are you following me here?), I am receiving a good bit more each year from SS than I paid into the system every year.
In other words, this looks like a good deal to me. And I am indeed enjoying it.
I retired to Mexico 11 years ago at the tender age of 55, and I now hold dual citizenship. My wife is Mexican. I know lots of Mexicans, yet I have never heard of this privatized retirement system you refer to down here. Perhaps for government workers, which my wife used to be. She did have a retirement system, but she did not get to choose where the money went, and when she retired, the government refused to give her the money. Corruption. She never got a plug peso. She wuz robbed, as they say.
Your video cites a number of countries with a privatized system. Some of the nations I would trust further than I could toss them. Australia, Denmark, the U.K. Many are just hotbeds of corruption: El Salvador, Kyrgyzstan, et al.
And, as you mention, the privatization requires individual responsibility. Some Americans are responsible with their money. Most are not.
I agree with the fact that social security probably is going to have to decrease because right now the budget deficit is out of control. They are not going to increase the social security tax because there are so many other places that our budget needs money and if the taxes are going to increase the revenue should go to the deficit.