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December 7, 2004
Has the White House Finalized a Plan on Social Security?
KipEsquire quotes a Reuters article that makes it sound like the White House has settled on a plan to reform social security. The quote on his site states:
The Bush administration favors a plan that would allow workers to voluntarily redirect 4 percent of their payroll taxes up to $1,000 annually to a personal account.
Maybe I'm nitpicking but the full quote from the article he links to is as follows (emphasis added):
But Republicans say the Bush administration favors a plan that would allow workers to voluntarily redirect 4 percent of their payroll taxes up to $1,000 annually to a personal account.
Actually, the truth is I'm probably just hoping that the addition of "But Republicans say" means that nothing is set in stone yet. If all we get is 4 percentage points I'll be disappointed. I want this plan front-loaded big time. I prefer a version of Paul Ryan's plan that allows you to invest 10 percentage points of your first $10,000 in income into a private account. This would insure that nearly everyone that works gets at least to the $1000 mark and it would give us some hope of truly creating an "ownership society". After the $1000 investment point has been reached they can scale down the percentage to help fund the current system.
Not to pick on the guy but I have a few other issues with the post. In a way he makes the $1000 a year seem like nothing. But if he'll allow me to goose up his assumed rate of return just a tad, from 7% to 8%, then an individual who starts working at 18 would have over a half-million dollars as they approach their 66th birthday. That's a decent amount and it assumes they never invest more than the bare minimum.
Also, Kip hits the nail on the head regarding several key secondary effects of the private accounts, but doesn't mention one of my favorites. All this money currently moving from our paychecks to consumption expenditures or to purchase U.S. Treasuries starts getting invested in real assets. This should be phenomenal for economic growth and is another important side effect.
Posted by Peter Mork at December 7, 2004 6:17 PM
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