The Social Security Trustees released their latest report yesterday, which showed that the finances of the system are deteriorating. In particular, The Trustees moved up the date when Social Security will become insolvent by three years, from 2036 to 2033. In 2033, absent any reform, the Social Security benefits of all recipients will be reduced across the board by 25%.
With Newt Gingrich vying for front-runner status in the Republican presidential primaries, his positions on important public policies such as Social Security and income taxes deserve scrutiny. In both cases, Gingrich adopts familiar Republican concepts — but then undermines their key objectives.
Last week, former House Speaker Newt Gingrich unveiled details of his plan to partially privatize Social Security. His plan would allow younger workers to contribute a portion of their payroll tax obligation to a private investment account. Roughly speaking, Gingrich is signing on to the legislation from 2004 sponsored by Representative Paul Ryan (R-WI) and former Senator John Sununu (R-NH).
In not unsurprising news, the Supercommittee will shortly announce that they have failed to reach an agreement to cut $1.2 trillion from the deficit over ten years. The New York Times reports on why the twelve-member group became deadlocked:
In the end the two sides could not agree on a mix of tax increases and spending cuts and — perhaps above all — on the fate of the tax cuts originally signed by President George W. Bush, which are now scheduled to expire at the end of 2012.
A few days ago, I wrote about Rick Perry’s unviable tax plan. In the same policy document (PDF, see page 14), he outlines his beliefs about Social Security. A few months ago, Perry was calling Social Security unconstitutional and a Ponzi scheme, but now he seems to want to preserve it. Rick Perry’s statements about Social Security have moderated, but his proposal remains very far to the right.
Advisor One reported on a speech that I made about retirement. For the most part they understand my positions, but I want to clarify some of what they reported.
Speaking in Boston on Monday evening at the 4th annual Retirement Income Symposium, Pozen first said that it’s “pathetic on how little we’ve agreed on to deal with our debt.” Charging that “We’ve only agreed on $1 trillion; we should be aiming for $5 trillion,” he then laid out a proposal to “to keep our GDP to debt ratio as it is over the next 10 years.” Continue reading
Herman Cain has been busy lately touting his 9-9-9 tax plan, which I wrote about on Monday. He has countered criticisms that his plan is regressive by noting that the current 15.3% payroll tax (which applies to the first $106,800 of income) would be abolished—lowering the tax burden for the working class.
This analysis leaves many questions, the most important of which is the issue of paying for Social Security and Medicare—which the payroll tax currently funds. Mr. Cain’s apparent solution to this problem would be to gradually move away from Social Security towards the Chilean model where employers contribute a portion of their payroll to a private account. But this change would not solve the problems with the program.