A WORKER-OWNED INVESTMENT SYSTEM
January 27, 2005
Because of changing demographics, the Social Security system must be fixed. Some have suggested raising payroll taxes by a third or reducing benefits by a third. President Bush has a better idea: guarantee existing benefits for the retired and near retired, and move from a government payment system to a worker-owned investment system for younger workers, says Pete du Pont, former governor of Delaware and chairman of the National Center for Policy Analysis.
There already is a model for such a reform, the Thrift Savings Plan (TSP) for federal employees, explains du Pont:
- It allows them to contribute up to $12,000 into a personal account they own and control.
- Employees can choose among five different funds -- government bonds, a fixed-income fund, a common stock fund, international investments and a small-cap stock-investment fund -- or a mixture of them.
- Today, nearly 3.5 million federal employees participate, and the fund's value is more than $120 billion.
No one has lost his shirt, and participants own real assets for their retirement, says du Pont.
Worker-owned investment accounts for Social Security would allow young people to instantly become owners of real assets, which would be, in President Bush's words, "a nest egg you can call your own and government can never take away." How big a nest egg? At $1,585 a year, a young medium-wage worker entering the workforce today would amass about $302,000 over his working life, enough to pay a benefit equal to what the current system promises. And for minority workers, who have shorter life spans and often don't live to receive Social Security benefits, the assets their survivors would receive would be a huge positive, says du Pont.
Source: Pete du Pont, "The New New Deal: Social Security reform pits progressive Bush against reactionary Dems," Opinion Journal, January 26, 2005.
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