Goodman: Saving Social Security
August 7, 2000
If we do nothing about Social Security, according to NCPA president Dr. John C. Goodman, the tax burden for elderly entitlement benefits will keep growing "as far as the eye can see."
- Without reforms, the tax burden will become uncollectable.
- Now 15.6 percent, it will grow to one-third to one-half of their wages by the time today's teenagers retire.
- Demographics also work against the system; a developed country needs 2.1 births per adult female to sustain population, and the U.S. has 2.0.
- Thus, the population will decline, leaving fewer young workers to pay for more older retirees.
The Social Security surplus for the next 10 years is about two percent, which is why all plans for reform focus on 2 percent. It's a small amount, but for someone entering the labor force today, investing two percent privately would enable to replace half of his Social Security benefits.
"What no one is talking about," Goodman added, "is taking the rest of the (federal) surplus, another 2 percent, and putting it to use as private investment. If we did that to 4.3 percent (of payroll) we'd have the first generation to fund its own retirement. Then we could turn our attention to Medicare," which is an even bigger problem than Social Security.
To demonstrate how a privatized Social Security could work and how it compares to the current system, the NCPA has launched a web site with the most sophisticated calculator available -- mysocialsecurity.org.
Source: Scott Burns, "Saving Social Security," Dallas Morning News, August 6, 2000.
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