Funding Social Security

The Joplin Globe

Here's a different approach to privatizing Social Security that should silence some older Americans while giving young workers an option to significantly improve the return on investment.

According to Laurence J. Kotlikoff, chairman of the Department of Economics at Boston University, there is a relatively simple, secure way to make this happen: a national retail sales tax, something that President Bush has briefly mentioned.

Kotlikoff suggests a three-part plan that would (1) replace Social Security payroll taxes with a federal retail sales tax; (2) eliminate further Social Security benefit accrual and paying only current retirees and workers; and (3) set up individual accounts for market investment but with government guaranteeing a floor. ...

When a worker retires, balances would be converted to inflation-indexed pensions. All the paperwork, investing and conversions would be handled by the Social Security Administration, not a Wall Street firm or financial institution.

Kotlikoff's idea apparently is intended to mollify Democrats who oppose any sort of privatization of even a small part of Social Security. The national sales tax is a reform of a system heading for trouble as baby boomers arrive in droves, and it does give each American a piece of the capitalist pie.

But the plan falls short of giving young workers the freedom to invest their money as they see fit and to seek as much of a bang for their Social Security dollars as possible.

The proposal appears safer than a system that ultimately could rely on one worker to cover several recipients. The national sales tax deserves exploration at length by Congress and economists.