Monday, November 18, 2013

The 401(k) Failed as the New Pension Scheme. What Could Take Its Place?

Elizabeth Warren: I get an idea she means business.
An expanded Social Security, that's what! Could we also have private accounts? Sure! They're called IRAs.

Imagine an America in which the notion of securing the future of our senior citizens was a vital goal, and we wanted to pursue that goal not at the expense of later generations, you know, without "stealing from our kids and grandkids." And one would think pursuing such a goal would be a very conservative goal, appealing to all political classes, even the tea partiers.

Just today, Elizabeth Warren joined a growing rank of economists, journalists, and Congresspeople who are supporting just such a notion. I applaud her, just as I applaud Senator Tom Harkin, Bernie Sanders, and others who are already fighting an uphill battle to pass a bill that raises current and future Social Security levels by removing the cap on contributions above the current $130,000 limit.

I'd also suggest increasing benefits even more by raising the employee FICA contribution by another two percent. I'd also raise the employer contribution by two percent, with the stipulation that half that would go as matching-fund contributions to employee IRAs. The employee's matching contribution would be automatically deducted from their paychecks.

Employees would not be able to withdraw from these IRAs until they applied to receive Social Security, effectively tying the two funds together at retirement, though they would be able to control how the money in the IRA is invested. Employees, of course, could have other IRA accounts over which they'd have total control.

As long as I'm living the liberal la vida loca, I might add another wacky idea to my wish list. Just found this in Slate today (cross-posted from Business Insider):
A simple idea for eliminating poverty is garnering greater attention in recent weeks: automatically have the government give every adult a basic income.
The Atlantic's Matt Bruenig and Elizabeth Stoker brought up the idea a few weeks ago when they contemplated cutting poverty in half, and Annie Lowrey revisited it in today's issue of the New York Times Magazine.
Real wages have been stagnant in America for decades now and income inequality has grown immensely. In the aftermath of the Great Recession, it’s only gotten worse. The Census Bureau reported in September that the 15 percent of Americans (46.5 million) live below the poverty line. Government benefits like food stamps and TANF help lift some of them above the line, but millions still live below it.
The author, David Vinik, goes on to explain how it would work -- it would, among other things eliminate the need for all federal and state aid, as all aid programs would be subsumed by the basic income payment -- and how it would be paid for -- the savings from all those other programs, plus other sources such as a carbon tax or an end to farm and energy subsidies. BTW, the amount of the payment would be tied to the official poverty level. Other benefits?
The clear one is that no American would live below the poverty line. The U.S. has been waging the War on Poverty for a generation now and still nearly 50 million Americans are below the line. This would end that war with a decisive victory.
There are knock on effects as well. Americans would have greater leverage to demand higher wages and better working conditions from their employer thanks to the increased income security. Families could allow one parent to take time off to raise their kids. Eliminating the numerous different government welfare programs would also lead to efficiency gains as adults would simply receive their check in the mail and not have to waste time filling out paperwork at numerous different offices.
I like it. We could eliminate whole bureaucracies on the state and federal level and let the IRS manage this one automatic payment. The War on Poverty has been a colossal failure, just as the War on Drugs has (OK, add an end to that war to this la-vida-loca wish list, too).

Switzerland is currently toying with the idea, albeit on a bigger scale -- they're voting on a $2800 a month guaranteed income.

Imagine: spreading the wealth around so no one was poor. It would be fun watching Rush Limbaugh's head explode when he hears about this. Somebody call him!

How dare you even suggest ending poverty?!

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