Privatize Social Security NOW! It would have been a phenomenal thing to have done back in 1997. It is a good idea NOW! And just like the best time to plant a tree is years ago, the next best time to plant a tree is… you guessed it… NOW. This is a long read from the Cato Institute, but well worth it even if you only have time to read the executive summary.
I would like to highlight two of the benefits.
- It removes the Federal Government’s access to Social Security funds as a means of disguising budget deficits.
- It compartmentalizes the individual participant’s contributions into accounts that are privately held for the future benefit of the same individual retiree.
These two changes would be enough to make me opt for the private plan. Yet the benefits continue.
- Conservative investment returns have the potential to be significantly greater than the investment return the Social Security Administration obtains from loaning funds to the Federal Government.
- The employee could choose to pay taxes on the employer’s contribution to this private retirement plan which would be rolled into a ROTH IRA.
- The employee could choose not to pay taxes on the employer’s contribution, and those funds would be rolled into a Traditional IRA, and taxed upon withdrawal.
- The income taxes paid on these funds would be used to pay the benefits of those who choose not to opt out of the government Social Security plan.
- The increased capital investment will provide corporations with additional equity infusions instead of needing to access the debt markets to fund operations.
- There will be cost savings due to reduced fraudulent claims, because private firms with a profit motive will likely do a better job of addressing those issues, much like insurance companies do today.
The final result of all these measures would likely be an increase in the incentive for employment, and a decrease in the cost of employment for companies. This would reverse the current downward pressure on the economy that presents systemic risk due to the cascading impact that the combination of higher unemployment (read more government expense and less government revenue) and the resulting lower consumption. This spiral needs to be reversed. Debt caused the problem, and reversing this Social Security debt by Privatizing it is the way to go.