The conservative movement, thank God, has been blessed with a number of people who quietly do excellent work advancing the cause. One such person is Peter Ferrara. For nearly thirty years Peter Ferrara has worked tirelessly on welfare reform, Medicare and Medicaid reform and Social Security reform, as author of SOCIAL SECURITY: THE INHERENT CONTRADICTION (1980), as consultant to several major think-tanks and as Director of the International Center for Law and Economics. Had his solutions been enacted years ago these programs would be on a sound basis instead of facing a looming crash of unimaginable proportions.
With the retirement of the baby boomers, Social Security is headed for a crisis which will lead to either stringent benefit cuts or a massive tax increase unless reforms are adopted.
Ferrara argues instead for a phase-in of private accounts. These accounts would be owned by the person to whom they are assigned; thus they could assist the potential retiree in accumulating wealth for his own retirement or to assist his family.
Under the Ferrara plan, Social Security recipients would be held harmless. If they did not want to switch to private accounts they would be guaranteed the benefits for which they are now eligible.
For those who elect to go the route of private accounts it would amount to a massive tax cut for the individual. Ferrara demonstrates how much better the market has done compared to the government-run Social Security program. It is remarkable, and it can be demonstrated. For a short time individuals working for non-profit institutions were allowed to opt out of Social Security. I know. I did it for a number of years. Workers for a mid-sized city in Texas also opted out. They formed the kind of private accounts for which Peter Ferrara argues. Over the past couple of decades these city workers now have individual accounts worth two and a half times what they would have had where they to have continued with the Social Security program. To put it simply money taken out of your payroll is not allowed to grow very much because you are paying for the benefits of others. You could have, within certain limits, control over your own account. You would not be permitted to invest in wild speculative projects but you would be able to grow your account as the market grows. If you are in a hurry for cash the stock market is the wrong place to be, with limited exceptions. However, if you invest in the stock and bond market your investment will grow significantly. Even those who were able to invest during the Great Depression (and I will grant you there were not many) were able to come out well ahead after a decade.