In the November 1, 2018 edition of The Wall Street Journal, Tom Giovanetti, President of the Institute for Policy Innovation, proposed OPTIONAL personal accounts in Social Security for payroll tax-payers. If you pay payroll taxes, you would have the option of using 25 percent of your taxes to start your own IRA-like account at your bank, broker, mutual fund or insurance company. It will be your personal decision but you will be able to create real assets with tax dollars you would otherwise never see again.
Your account would be like those created by the government of Chile in the 1980s:
Not surprisingly, over 80 percent of working Chileans signed up to have their own accounts. The plan was intended to benefit workers without financial means and retirement plans, and to reduce the unfunded liabilities in their Social Security system, making everyone more financially secure. Participants’ accounts consisted of mutual funds with portfolios of approximately 60 percent blue chip stocks for dividend income and growth, and 40 percent investment-grade government and corporate bonds for income and stability.
Recently in the U.S. House, Democrats and Republicans passed a bill making it easier for employers to offer 401(k) accounts, and for participants to convert their balances into annuity contracts with lifetime incomes at retirement, so no one would ever run out of money. So why not help Americans paying payroll taxes by letting them create their own accounts using a portion of their taxes?
A large number of Americans already use a portion of their taxes to create real assets in their personal retirement accounts: IRAs, 403(b)s and 401(k)s, in particular. We can do the same for working Americans and simultaneously reduce the unfunded liabilities in Social Security making everyone’s benefits more secure. President Trump, Republicans Democrats should provide this benefit through bipartisan support the same way they appear to be helping employers and would-be 401(k) participants.
We all need to recognize that this is also a national security issue. As Americans, we live in an increasingly dangerous world and our first line of defense is not our military. It’s our citizenry. If the citizens don’t have FUTURES WORTH FIGHTING TO DEFEND, they will not support the military by underwriting the costs and making the sacrifices necessary to win an extended and costly war.
This mindset was part of the problem with the Vietnam War. With burdensome taxes, rising inflation as we came off the gold standard, and a rising tide of regulations, Americans paying the taxes became concerned and worn out under those circumstances. It’s no wonder the problems on another continent wound up taking a backseat. Resulting in some Vietnam War veterans feeling betrayed when America pulled out.
The good news for us, and there is a lot of it, is that Americans and America are in a period of rising prosperity with futures that are increasingly worth fighting to defend. At the very same time, our adversaries are destroying their own citizens and economies in North Korea, Russia, China, Cuba and Iran. It’s like a dream come true when your enemies are weakening themselves as we get stronger.
And here’s the final point: too many Americans are seriously considering socialism and candidates like Bernie Sanders as an answer to our problems, both real and perceived. If Bernie succeeds, then our enemies will be able to count on entitlements, especially Social Security, dividing us based on older Americans receiving benefits, while younger Americans pick up the tab with no hope of getting their money back.
On the other hand, if payroll tax-paying Americans can have their own assets in accounts that they have chosen to have at their banks, etc., then a large part of Senator Sander’s prospective constituency will choose candidates who protect their assets instead of stalking them. And America will continue to get stronger.
Finally, when payroll tax-paying Americans have their own assets they will not only be better able to decide which political course they want America to take, but they will likely become better citizens, too, because they will become less dependent on untrustworthy politicians. The point is that people who have money and assets tend to make decisions for themselves. And people who make decisions for themselves tend to make better and more responsible decisions, period.
Payroll tax-payers having their own assets in their own accounts would be good for Americans and America when they get the same benefits as other working Americans who have retirement plans. Republicans and Democrats should be working together to make optional personal accounts in Social Security a reality for these Americans, right now. Our security and future depend on it.