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June 29, 2005
From the Mailbag - Pat's WSJ Article
I received this message via email:"I just want to point out an incorrect aspect of Pat Toomey's article on the DeMint proposal for Social Security. The SS surplus currently serves as general revenue for the government, if that money is converted to personal accounts it does indeed mean more debt for the country because its less revenue coming in. I dare say our federal government is not going to cut spending, so borrowing will have to fill in the revenue hole created by diverting that money. This seems like an obvious point. Am I missing something or is Toomey just ignoring this point in the interest of political rhetoric?"Actually, this person's argument is incorrect. With this new DeMint-Ryan idea, the government still spends the surplus. Remember, it isn't CASH that is going into the personal accounts, it is U.S. treasury bonds which the government gives workers in exchange for their payroll taxes. The government still keeps the money and still spends it. This plan just makes the debt explicit, rather than implicit so that it's reflected in the federal deficit. The only true way to keep the government from spending the surplus is to allow workers to invest their payroll taxes through personal accounts in non-government obligations (like stocks and corporate bonds). This bill will eventually allow that in a few years. Another advantage these DeMint-Ryan personal accounts have over the current system is inheritability. You can leave it to your children and your grandchildren if you die before retirement. While the DeMint-Ryan proposal isn't a perfect solution, it's in the right direction and it's a great first step.
Posted by Andrew Roth at June 29, 2005 1:39 PM | Print
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