Friday, January 2, 2009

Instead Spend the Trillion To Privatize Social Security

As the new year begins, Congress is looking to ram through a trillion dollar "stimulus" package. Obviously the concept is ridiculous: Extract money from the private sector and have the public sector spend it. The goal, though, is correct: Increase economic growth.

If a trillion dollars is on the table, why not use it correctly? The government should issue a trillion dollars of Treasuries - which are currently trading at low yields/high prices. Deposit them into private savings accounts for each taxpayer, based on current age and projected social security liability. Replace the payroll tax with a compulsion to contribute to the newly created retirement account. Three birds are killed with the same stone.

First, the Ponzi scheme known as social security is fixed.
Second, a real lock box is created for the taxpayer: an account with their name on it.
Third, economic growth will be greatly stimulated.

If for whatever illogical reason privatizing social security is too much for Congress to stomach, there is another simple alternative stimulus package: flat tax.

2 comments:

Anonymous Unwed Mother said...

I am not necessarily opposed to the privatization of social security. I recognize it for the three card monty game that it is and feel quite helpless to have contributed for so many years knowing I may very well never see a return on this the only retirement investment I have ever made. however, my worry is that the hands off deregulatory nature of the finance/political relationships would open the door for many more fraudulent schemes with even greater sized assets.
until the govt is serious about staying informed of what financial tools are being used in the markets I do not see anyway at all to put such financial power into the hands of only a few and an unchecked few at that.

JoeT said...

As logic would have it, your idea has merit: solve problems, don't throw money at them! It would be wonderful to address social security, tax payer savings, and economic stimulus. Unfortunately, as "governments turn", your suggestions won't even be comtemplated. Our esteemed members of congress have trouble understanding and dealing with one issue at a time. Convolve three issues and they will be hopelessly lost! Some variant that provides increased savings and an economic stimulus could be much more palatable. Stay away from the "third rail" of social security. It will need its own crisis to solve!!
Interesting approach, though.