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Originally posted by Bad_Rich_Chic
2. Please get someone started on this any time now. 'Cause I don't think the private account idea has been thoroughly thought out yet, and if no one suggests alternatives I think there's an increased chance it will pass without serious consideration.
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So here's my program for reforming social security:
(1) Diversify the portfolio in there now, investing limited amounts in corporate bonds and stock and in overseas government and corporate bonds and stock. This should increase return while reducing risk, for reasons I explained above. The investment as a percentage of the portfolio should be small, the move into the market should be done over time, and we should outsource the management to a number of different vendors so it is not centrally directed.
(2) Broaden the tax base. Social security should become a surtax on all income, not just a tax on wages. Part of the base broadening should go to reduce the rate, part should go to reduce the pending imbalances.
(3) Take the cap off. The cap should be taken off, so all income is subject to the social security levy. The resulting revenue should be used in part to reduce the tax and in part to reduce the pending imbalances.
(4) Create tiered benefits. Social security has to deliver a certain level of benefit to everyone. But a plan should be put in place to, if revenues prove inadequate, cut back on benefits based on a mix of means testing and payments in. That is, the wealthy who have made few contributions should be cut back first, with additional cutbacks being applied on a formula basis. But I'd limit it so cutbacks would never exceed 20% of the benefit.
(5) Reduce deferral on other retirement funds. The government has created an enormous industry with tax-advantaged retirement savings, and by deferring taxes on 401(k) and other pension benefits has helped lots of high income Americans build enormous assets. If social security is falling short, this is exactly the place I would cut back on our tax expenditures, by doing something like leving a 5% or 10% tax on income of these otherwise tax-exempt vehicles. It's still a huge savings incentive.
The above plan is political suicide, but that's beside the point.
