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Edited on Wed Nov-15-06 09:57 AM by Parisle
---- Since the Social Security "reform" issue is going to get bounced around some more during the two remaining years of the privatization-minded Bush neocon infestation,... and since democrats are the nominal proud owners of the program, I'd like to resurrect an idea I saw floated a couple of years ago. Does anyone remember "pre-funding?" It was the most innovative notion I'd seen, and it would seem to be quite effective...but it received absolutely NO media attention at the time. That's why I figure it must be a great idea for the average American.
----Here's how it works: Every year, there are about 5 million new American citizen births in the US. At birth, an infant would have a SS number assigned, and a $1,000 deposit made by the gov't into an account for that number. A BANK account, ok?..... one that earns real interest through its various lending and trust activities. At $1,000-per-kid, that first year's outlay would be $5 billion, but the plan also calls for a second $1,000 deposit in the second year of that child's life,... meaning that each person in the US would have an interest-drawing bank account of $2,000 at age two, and the plan would be costing $10 billion per year after the first year. (Note that this annual amount could easily come out of the roughly $150 billion per year "surplus" currently paid into Social Security, but it really ought to be initially funded by other budgetary means,.. like trimming federal pensions.)
----Let's say that the average person joins the workforce in earnest around age 20, so the start-up "cycle" of this plan will be 20 years. At the point at which a 20-yr-old begins working, they also begin paying their Social Security deductions, right? But at that point, assuming 20 years of "average" interest payments, they will already have an account of almost $5,000 into which their SS payments (or an actuarily-determined percentage of those payments) will go. After 20 years, the $10 billion expended on the first year's participants will have grown to $25 billion, and it will NOT have come out of taxpayer's contributions, but rather out of our economy's productive use of capital. It's just a matter of putting the money where it will do the most good, eh?
----Obviously the problem remains of continuing benefits payments to all those who missed out on the plan's start-up. But consider this: the projected "shortfall" in current SS revenues isn't for another 30-35 years. The 20-year start-up cycle of the plan fits conveniently into the timeframe in which we have to "fix" this situation. And no one can say that putting money into a bank isn't "privatization." It just isn't handing your money to Wall Street brokers; you still have banking laws, fiduciary constraints and FDIC guarantees on your side (although banking "reserve" regulations could stand to be strengthened). And if some additional federal funding is required after the 20-year point,... when participants' contributions go into their own accounts instead of the so-called "trust fund," then it would seem that the goal of preserving our supplemental retirement "safety net" is worth what we've wasted in Iraq, eh? Yeah,.. I think so. But that part of the transition would only be for a few years. We can handle it.
----And it should be apparent that the pre-funding plan holds other benefits for the American people and American economy. The pool of investment capital would be enlarged considerably,... money primarily for mortgages & small business, I would expect,... and lending rates would be kept down, as well. At the 20-year point, a total of $200 billion would have been added to the private banking system, along with the interest which began accruing 20 years earlier. The actual total at 20 years should be around $350 billion. Further considerations could include such things as the afore-mentioned actuarial "splitting" of contributions between trust fund and private accounts,... survivorship rights to those accounts,... and interest rate indexing as economic conditions rise and fall,... just to name a few.
----And since I tend to be a real "scatter-shot" type of problem-solver, I'd also expect to see some of the other Social Security remedies being adopted at the same time as the pre-funding plan. Raising the income ceiling on contributions would be among these,... along with putting the SS revenue trust fund off-limits from government borrowing,.... the "lockbox" we hear so much about. Just don't increase the wage deduction percentage, nor reduce benefits too drastically. That really shouldn't be necessary.
----Am I missing something, here? Can anyone suggest why this is not the ingenious "universal trust fund" that it appears to be?
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