Imagine what America would look like in a few years if people had the opportunity to own their own home, their own job, their own education and their own personal retirement account. It's not a pipe dream. It's not only possible but urgent that we build an America where in our democratic capitalistic system everyone not only participates but is a shareholder.
On Monday, the chief actuary of the Social Security Administration confirmed the feasibility of every worker's owning a substantial personal retirement account: He issued a favorable official analysis of a proposal put forth by personal accounts guru Peter Ferrara in a study published by a Dallas-based think tank, the Institute for Policy Innovation. In the IPI study, Ferrara advanced the idea of a large progressive personal-account option for Social Security.
The proposal would allow all workers to contribute 5 percentage points of the 12.4 percent Social Security payroll tax to personal investment accounts. The proposal is also progressive, however, because on the first $10,000 of wages each year the allowable contribution would be doubled to 10 percentage points.
Benefits withdrawn from the accounts during retirement would substitute for a portion of promised Social Security benefits, and the government would guarantee all retirees no less retirement income than what Social Security currently promises them. Because private-market returns are so much higher than what noninvested, purely redistributive Social Security can offer, the accounts would finance substantially higher benefits after a lifetime of investment than what Social Security promises, let alone what it actually can pay.
According to SSA's analysis, which can be found at Empower America's Web site (www.empoweramerica.org), allowing workers to dedicate this substantial share of their payroll taxes to personal retirement accounts would ensure high enough returns so that no one would be worse off, and most workers would realize an increase in retirement income. Moreover, the chief actuary demonstrates that earmarking as much as 6.5 percent of payroll tax revenues for personal accounts would not endanger the Social Security trust funds or imperil the federal government's fiscal situation; in fact, doing so would improve the outlook for both.
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