Raiding Retirement

New York Post published an article by Stephen Moore entitled Raiding Retirement

Saying the debate about Private Accounts should be about the positive benefits of giving every worker in America an account that they own themselves and that, as President Bush puts it, "can never be taken away by the government." Thanks to compound interest, such a system would see most young workers build accounts that total hundreds of thousands of dollars by retirement age.

Stephen is absolutely correct.

This is a very attractive proposition to workers under the age of 40. It wrestles authority away from government and gives each individual ownership and control of his or her own nest egg.

And the Democrats fear that would turn them into Republicans.

Instead, the debate on Social Security has morphed into a fracas about shoring up the finances for the government program by raising taxes, cutting benefits and/or raising the retirement age.

The Republicans seem to be offering a plan that says "pay more, work longer and get less in return." No wonder the polls show sagging support for the president's plan.

The problem is that Stephen's plan would be very good for 20 to 30 year olds, and regardless of what is done in the meantime, Social Security as we know it today will NOT be available to today's 20 to 30 year olds, and the only solution for them is to start personal accounts NOW so that by compounding it will be available for them when they are ready to retire.

Meanwhile, Democrats argue that the personal account system that Bush wants will rip a hole in the Social Security Trust Fund, because of the large transition costs. In fact, the moral high ground here belongs to the president — because those "transition costs" are all about putting a stop to Congress' annual raid on Social Security.

And is anyone surprised that they would fear that?

Every year, far more gets paid into Social Security than the program pays out. But Congress simply spends it all — on top of what's usually reported as "the deficit."

Over the past 15 years, those raids — money paid into Social Security, but spent on other government programs — have totaled more than half a trillion dollars.

As former Chrysler Chairman Lee Iacoca once declared, any CEO who tried this with a private firm's pension fund would be thrown in jail.

Click to enlarge

Left Wing Blogger Angry Bear said I finally read something from Stephen Moore worth quoting but unfortunately he just quoted the above paragraph, and then he said Of course, this was Lee Iacoca’s line and Stephen does not really go after his accomplice in their Soc. Sec. scam. But George Bush ignored Al Gore’s lock box comment about not squandering the Social Security surplus and I agree this is criminal. The rest of this NY Post piece is Moore’s usual garbage Well I know Angry Bear is angry, and perhaps that is why he is confused, but the problem with Gore's LockBox is that it was a total fiction. If Bush is "raiding the lockbox" then Clinton did too, and had he been elected Gore would have raided it. Because there is no real lockbox. The law does not allow money to stay in the "Trust Fund"

So why not begin the creation of personal investment account funds with the surpluses collected each year from Social Security payroll taxes? Under this plan, all surplus collections from Social Security would automatically be diverted into personal accounts for all the workers who paid the payroll tax. The theme of this campaign could be: "Stop the raid; start the accounts."

Sounds good to me

It would be fascinating to hear liberal groups like MoveOn.org and AARP explain why it is preferable for Congress to squander the surpluses, rather than deposit the money into workers' accounts.

That's what their claim boils down to: Rather than let today's young workers start building real retirement security, the anti-reform crowd thinks the government should take nearly $100 billion a year to spend on its programs — cash for causes from corporate agriculture to the makers of Pentagon weapons systems to the Cow Girl Hall of Fame.

It may be that the only way to stop this raid on our retirement dollars would be to deposit the money into privately owned worker accounts. If workers have the dollars in their personal accounts, there is no way Congress can get at the money to (mis)spend on other activities.

Over the next 10 years, we're talking more than half a trillion bucks: Money that can either be saved by individual American workers — or taxed in the name of Social Security but spent by Washington.

Personal accounts limited to the size of the Social Security "surplus" would be smaller than most proponents of Social Security reform have long sought, but it establishes the principle — and gives us all a chance to see how it works in practice.

And once the 20 to 30 year olds see the money compounding, they will be more inclined to put additional money in IRAs or 401Ks

I'm certain that workers will love it — and over time demand even more true ownership of their retirement money.

So stop the indefensible raid on the Social Security trust fund by starting personal retirement accounts.

Sounds good to me. And as GOP Bloggers pointed out Alan Greenspan agreed Tuesday before the Senate Special Committee on Aging: Private Accounts would be the Lockbox:

"The major attraction of personal or private accounts is that they can be constructed to be truly segregated from the unified budget," Greenspan said in his testimony.

Also see Donald Luskin's article in NRO

Larry Kudlow suggests Begin building a real pension lockbox. The funds could be invested in stock market indexes or bond market indexes. But the government would have to stop spending money that is not really theirs. Another good idea.

On first glance that seems like a reasonable alternative, except the government would be investing the money in stocks, and there would be extreme pressures to attempt to do social engineering by those investments. The money needs to be in private accounts where professional make the investment decisions, rather than in the hands of political appointees.