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Originally Posted by pan6467
Your plan is very much based on "trickle down" economics and it doesn't work. We have that now and with the tax cuts the rich have gotten it is not stimulating the economy nor are wages going up. Jobs are still being exported and personal debt is getting higher. While standard of living and education are falling way behind the rest of the industrialized world.
But there in lies the attractive portion to my idea. If you are someone who is fiscally sound and knows how to invest or whatever, then once you payoff your T-Bill you're done. Invest your money how you wish. You have your retirement taken care of, and if you make enough early in life you reap the benefits of being able to spend your money how you wish.
It takes away ANY of this dependancy on younger workers paying into a system that they will never recieve benefits from.
This also helps rebuild the mom and pop shops that are the backbone of our country. Say by age 40-50 you paid off your T-Bill, so you know your retirement is taken care of. You then invested wisely have a nice little nest egg and decide to open a business with it.
The possibilities are endless. Of course we will see people who don't pay up their principles because of laziness or whatever, and while that is a shame, they will be paid for what they did pay into it. (Much like today.)
This is a very doable, and self reliant plan. As I have stated the only true problem I can foresee is how do you switch systems without affecting someone.
Also as inflation goes up, the government can raise the face value of the T-Bill and the principle, since it affects only the generation and not future generations. Example: this year's babies get a million dollar T-Bill (with the $50,000 principle) with a retirement age of 70 ..... 20 years from now the babies born in 2025 may have to get a 1.5 million dollar T-Bill with a $75,000 principle and retirement age is raised to 75 for them because life expectancy has gone up. In either case the person pays it off they have a retirement taken care of.
This also frees up monies from companies and with tax incentives and such provides for research and development, wage increases and new job growth.
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First off, my plan wasn't based on trickle-down economics... My point was simply that the wealthy don't need social security and, in a privatized system, should have an opt-out. Also, while trickle down economics might not work, market investment or even just consumer spending has a much more positive effect on the economy than money sitting in the welfare pool.
Secondly, let's take your little example and throw some numbers and reality in it, shall we? Sure, you'll make your system sound wonderful if you tell people that they'll get 1 mil for 50 k, but that is likely untrue. Well, perhaps not. We'll see... *Crunches numbers*
Okay... For a fed T-note to mature in 70 years with a 2000% return would require a rate of a tiny bit over 4.25% T-bill rates are currently half that, however they were over 5% in the late 90's, hovered around 3.5% in the early 90s, and during the "Holy fuck inflation is out of control" 80s, they got as high as 10+%, but were mostly around 7% or 8%. Is 4.25% reasonable? Sure. So far so good, Pan!
However, there is a problem in that the T-bill is not "bought" at birth, merely the potential and expectation to be bought are there. This being the case, either the government would have to suck up the interest or the buyer would have to pay more than the initial T-bill purchase price. Let's assume that the government will NOT suck up the interest (as SS could surely not sustain that loss forever, especially when they no longer have revenues). Wait... Since we would all have T-bills and there would no longer be a SS $ pool, SS could not even afford to charge any less interest than they pay out for the T-bill because if they did then they would need some kind of income to make up fro the difference. I welcome someone to try to prove me wrong, 'cause I may be missing something.
This being said, I must assume that the T-bill does not initally have value, but begins to accrue value as the individual starts to pay for it. Let's keep the assumptions of a 20-yr-old start point and a 70-yr-old retirement point, so 50 years of employment. Let's take someone with a wage of $70,000. Granted, very few people will make this much at 20, but lets just say that I picked a high number to pre-adjust for wage increases so I don't have to factor it in later (makes my math more annoying - if someone else wants to do it, go right ahead). So being that we've established SS can't give you more than you've put in, the interest starts accruing at %4.25 once you've put the money in. Let's keep the SS tax rate at 6.2%. This means that $4340 a year would be going into this individuals SS fund. If the employer still payed an equal share, then this would be $8,680 a year. (I'll keep track of both) *excel stuff...*
HOLY CRAP!!! Well, I surprised myself... At a steady 70 k income, the individual would have a T-note worth $746,603.27 at retirement. If the employer was matching his SS taxes, this note would be worth double this, or $1,493,206.54! Now let's figure an inflation rate... Taking a 58-yr average (2004 - 1947) we get... uh... 3.38% This means that the total inflation from when the individual started working until he retired would be... 526%. This would make the present-day value of his retirement funds (that is, if the present-day assumption is made for when the individual is 20) $141,939 or $283,879. Not half bad.
In the current system, if one expected a $2000 monthly SS payout (a good assumption?), with a 2%/yr cost of living adjustment, even if one did not retire until 70, and lived to be 92, that person would still only recieve $864,832.
Well... There's my math. Seems like a resonably good system. I still don't think it's worth the cost of transition right now, but perhaps in a time of lower defecit I could support a program like this one.
What do you guys think?