More Social Security action
Anonymous said: "So...I'm no expert on this. I'm barely conversant, probably, but if I make more from my privately-invested retirement money than I do from whatever the gov't gives me, shouldn't I go with private accounts? I mean, for each individual, isn't investing better than having more taken out of your paycheck? As far as SS in general, I know that it is supposedly 'running out of money', but if we assume that the government will cover its debt, then how will my private investment cut anyone's benefits? I mean.... I can only take out what I put in (plus interest), right? I don't get it."
That's just it: it neither cuts anyone else's benefits nor fixes the problem in the system. Here's my deal. What I object to is not the accounts themselves, but the spin that's put on them that says they will fix the problem. I'm not against private accounts. There is a real chance to innovate here. Imagine people investing all of this money into American businesses, supporting them, and generating more wealth and work. That's great, and as long as the government guarantees the same return that SS has traditionally had, it's a win-win situation. Right now you get 3% on your money because of inflation. Pretend I get a 5% return on my private account and lose 0.5% of that as a fee to the person managing it. I'm still up 1.5%, and I've contributed to the livelihood of American business. So we're set. All I want to know is that it's guaranteed.
What ticks me off is when people push for the private accounts without a plan for adapting to the fact that we're an aging society. In my mind, it's disingenuous for Republicans to make a serious distinction between raising taxes and cutting benefits: the bottom line is less money somewhere. That's what's wrong with Barnes's claim. Let's break this down. We'll run numbers here pretending that we have two people in this system and that the system only covers their one check. Johnny Private made $100 this week. He invested the max that he could, 4%, in his account. He still paid 2.2% into the trust fund, and his employer paid 6.2%. Sally Public also made $100 this week. She invested 0% in her account, putting 6.2% into the trust fund, and her employer invested their 6.2%. Barnes says, correctly, that the 4% Johnny Private invested in his account does NOT need to be paid back to him by other SS trust fund money when he retires. But that' s $4 that's not in the trust fund to be paid to someone else! Effect on solvency: absolutely zero. Affect on Johnny Private's own personal benefits: slight increase. Problem in system not solved.
So I say raise the cap. Someone making $10,000 a year pays $620 a year in SS tax, or 6.2% of their income. Someone making $200,000 a year pays $5580 a year in SS tax, or 2.7% of their income. That's not even a flat tax--that's REGRESSIVE, because the cap is set so that only your first $90,000 of income is taxed every year. Raise the cap and bring in government-guaranteed private accounts. Problem solved.