From: rja@mahogany126.cray.com (Russ Anderson)
Subject: Re: SOCIAL SECURITY: perpetual pain and problems...
Originator: rja@mahogany126
Keywords: social security
Organization: The 1991 World Champion Minnesota Twins!
Date: 15 Oct 92 10:22:39 CDT


In article <markts.718918490@mcl>, markts@mcl.ucsb.edu (mark t schmidt) writes:
> In rja@mahogany126.cray.com (Russ Anderson) writes:
> 
> >> anyone who can make money is smart enough to manage that money
> >> better than the government. Unfortunately that means getting rid
> >> of social security. Any ideas?
> 
> >Change Social Security to a mandatory 401k system.  The "401k"
> >part will mean that the money is actually invested in the person's
> >name, without the government touching it.  The "mandatory" part 
> >is for political reasons because the public wants a Social Security
> >system (and any attempt for an optional system will be labled as cutting
> >Social Security).
> >Real savings & investment for retirement.  What a radical concept.  :-)
> 
> Russ, this sounds like a solid idea, but how would the transition from
> the current system to a 401k investment system take place? Somehow 
> the current level of spending on social security can not be allowed
> to nosedive, yet people still in the midst of their earning years 
> should be allowed to manage a portion of their long-term savings.

Yup, it's a delema.  There is currently ~$8 Trillion in unfunded 
future Social Security liability (due to the pay-as-you-go system).
With baby boomers getting older the problem (with the current system)
will only get worse.  The only hope is to change to a 401k type system
now, while baby boomers still have good earning years left.

The transition would probably have to be something like people under
30 get nothing, under 40 get a few thousand (maybe a % of what they've
put into SS), under 50 get more, and 60+ are covered under the old
system ('til they die).  It will cost $100's of Billions, be political
suicide, but be much better than the current system.  One possibility
is that people are given a choice of "opting out" (renounce all claims
to the SS money they put in and any benefits due) or paying an additional
2% FICA to fund the transition (getting the benefits above).

> One possibility: My company's 401k plan gives us the choice of
> 3 mutual funds for our profit sharing income. Perhaps the choices
> of funds could be dictated by the government for a certain portion
> of the individual's investment. These funds could be *slow* growth
> government t-bill and bond funds. This could give the government
> a small portion of the capital it may need to fund social security.
> (Too small yes, but better than nothing.) 

Private investment companies would handle the 401k accounts (keeping
a % of the investment income as their fee), as is done now.  As competing
companies, they'll offer "products" such as choosing between stock,
bond, and money market accounts.  People could choose which company they
want to handle their account (or go with their employer's choice of company).

> Of course this would only be increasing the deficit. And having the
> government dictate anything goes completely against my libertarian
> instincts, but I am trying to be slightly realistic. 

Any transition sucks, but the reality is that doing nothing will suck, too.

-- 
Russ Anderson    |  Disclaimer: Any statements are my own and do not reflect
------------------              upon my employer or anyone else.  (c) 1992
EX-Twins' Jack Morris, 10 innings pitched, 0 runs (World Series MVP!)
Newsgroups: sci.econ,soc.culture.usa,alt.activism