Personal Accounts and 'The Way Forward'
March 13th 02:57:43 PM
Peter Ferrara of the Institute for Policy Innovation has a new publication titled Personal Accounts, Not Tax Increases, a 2-page paper that begins with some history of the advances toward personal ownership and ends with "The Way Forward," a prescription for "the only way to achieve personal accounts." In between, Ferrara argues that it has been a mistake to consider benefit cuts or tax increases as part of a reform package, as "it was including these options on the table that actually killed the campaign for personal accounts" in 2005.
S4 asked Ferrara a couple questions about his publication, and his responses were of generous consideration and length. Keep reading for some of the highlights of our email exchange.
S4: What is the most compelling reasons for young people to care about Social Security reform?
PF: The most compelling reason for young people to support Social Security reform is that Social Security offers a very bad deal to today's young workers. Even if Social Security somehow pays all of its promised benefits, for most young workers today the real rate of return paid by the program will be 1 to 1.5 percent or less. For many it will be zero or even negative. A negative real rate of return means that you effectively get no interest, but rather you lose money each year instead.
(...) In addition, workers would personally and directly own the money in the accounts, and would be free to leave some or all of the money to their families. The accounts would build up family wealth and so strengthen the family. The accounts would reduce taxes and increase savings and investing, adding to economic growth, more jobs and higher wages for today's working people. Along the way, the personal accounts would also eliminate all long term deficits of Social Security.
The accounts would also do more to reduce Federal spending than anything else, by far. They would shift SS spending from the public sector to the private sector, a massive, unprecedented reduction in long term government spending.
S4: If we do see a Social Security reform bill that works its way through Congress sometime soon that includes Personal Retirement Accounts with a small tax increase, should young people support the bill?
PF: Too many people who came to Washington to reform Social Security with personal accounts, many of them supposed libertarians, have been confused by the Washington establishment into running around town now promoting tax increases. These people are not good and wise leaders.
If you want personal accounts, you need to promote personal accounts, not tax increases. Nobody in Washington has even offered to support personal accounts in return for tax increases. Tax increases and cuts in future promised benefits are the opposites to personal accounts, not complements to them.
Personal accounts should be promoted by contrasting them with tax increases and benefit cuts, not by polluting personal accounts with awful tax increase/benefit cut proposals that make Social Security a worse deal for young people. Such pollution of personal accounts with pedestrian tax increase/benefit cut thinking is the way to kill personal accounts politically, not achieve them.
So young people should not embrace anyone who comes to them and says they will save Social Security for young people. Are they going to save Social Security by imposing even greater burdens on young people by raising their taxes and cutting their benefits, or are they going to fight for a better deal for young people through personal accounts, and do so effectively?
Posted by Ryan Lynch
Comments
Barack Obama is hatching a plan to get you extra cash on payday so you won't need a payday loan. He is proposing a tax cut and what he calls the Make Work Pay Credit. It’s a different strategy for stimulating the economy. So far all the efforts that have been made by the current administration to get the economy back on track seem to be hurting instead of helping and the need for a payday loan with many people has increased. It’s impossible to tell the future; maybe the steps that have already been taken will help straighten things out in the long run. But the economy has been growing steadily worse since the mortgage crisis and the credit crunch hit.
Posted by Kasey P. on January 10th 02:40:14 AM
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