Meanwhile, as President Obama uses U.S. government bonds to create magical new risk-free retirement savings accounts, there was not a word in the State of the Union of the broken state of affairs of the government’s oldest retirement plan – Social Security.
According to Social Security’s latest trustees report, the revenue shortfall, in today’s dollars, of projected requirements of Social Security to meet its long-term obligations is $9.6 trillion. Beginning in 2033, when those now in their late forties start retiring, there will be only funds “sufficient to pay 77 percent of scheduled benefits.”
If the president really wants to enhance retirement savings of low and middle income Americans, and create real savings and investment while addressing the fiscal disaster of Social Security, let these folks opt out of the Social Security black hole and use those funds to open a real retirement account.
This is what was done in Chile and it worked. The Chilean economy grew because the new retirement accounts directed investments into the real economy (as opposed to creating more government debt) and Chilean workers have achieved real returns and newly created wealth.
Wouldn’t it be novel if the president really reported on the State of the Union each year and if we solved our existing problems before creating new ones?