Friday, October 22, 2010

From a Blogger at DFA

My re-forming of Social Security

By publius on Oct 22, 2010 11:47 PM EDT

First, take it off the table when addressing the deficit. It never has contributed to the deficit and has in fact financed much of it.

Reduce the deficit with progressive income tax increases now and spending reductions if and when economy seems to get back to some sense of normalcy, ie 3 % growth, 6 % unemployment. Finance Sustainable economy and infrastructure with carbon tax.

If health insurance coverage mandates and patient care spending percentages are enforced, the insurance industry will say no thanks and medicare taxes will increase very modestly as healthier, younger population is absorbed into the public program.

Okay, so deficit, public investments, and even health care coverage solved, what to do with social security?

With the other budget items accounted for separately, SocSec will continue to run a surplus with revenue in excess of benefit payments. There will be a percentage of the FICA proceeds that are redistributed to current beneficiaries and a remaining percentage that is surplus.

Present practice is for the Federal government to put that surplus into treasury bonds/bills that it buys from itself. That will no longer be the case.

From now on, that percentage of current benefit payments and surplus in treasury notes will be applied on an individual basis nationwide.


Investing the wage earner in America

By publius on Oct 22, 2010 11:55 PM EDT

If say 65 % of FICA revenues were paid out to beneficiaries, then 65% of each wage earner's payroll deduction is applied to the current expenditure.

The remaining 35% (or whatever the program percentage annual surplus is) will purchase treasury notes on an individual basis.
The wage earner's surplus contribution is returned with T-bills with their name on them. Year by year.

That, my friends, is a lock box with every worker having their own key.