Starting the Biggest Chain Letter in History
Robert Samuelson is one of the best economic journalists around. His latest Washington Post column, “Welfare Junkies” (requires simple registration) offers some insightful analysis of federal retirement policy, but flubs the issue at the end. (It’s still worth a read.)
The flub at the end is the treatment of alleged “benefit cuts” entailed by allowing taxpayers to retain ownership of their earnings and put them into personal retirement accounts rather than having them confiscated and tipped into the “pay-as-you-go” pyramid scheme of Social Security. Those who opt to keep their own money rather than have it confiscated will correspondingly diminish their claim on benefits (the alleged “benefit cut”), but would more than make up the difference by being allowed to invest in stocks (of wealth-producing companies) and bonds. That would reduce the claims on the state and more than offset the diminution by the increase in private retirment income. Furthermore, by changing the rate at which benefits are increased from the growth in wages to the rate of price inflation, the gap between tax income and spending will be drastically narrowed, without any actual cut in benefits. The burden on the taxpayers can be drastically reduced without cutting the real benefits of any class of recipients. Furthermore, the outcome would be that everyone who chose actual investments rather than putting their money into a chain-letter would be out of the government system entirely.
Is it the very best approach I might imagine? No; I would prefer not to have any compulsion at all, including the compelled choice between taxation or investment. But is it a gigantic improvement over the system we’ve got? Yes; it reduces the burden on taxpayers, replaces state-dependency with ownership, and puts an end to an unsustainable chain letter. (More information is available at www.socialsecurity.org and at www.teamncpa.org.)