Home › Blogs › Sarah Burris's blog ›

Social Security Privatization Will Not Stem Republican Youth Losses

Yesterday in USA Today, Republican operative David Frum published an Op-Ed acknowledging the Republican Party's huge loss of support from young voters, and outlining a four-point plan to recapture the youth vote and revive the days of Reagan and Bush Sr.

Frum gets a few things right. Millennials are the most anti-Republican age group in the electorate, that position is a response to the failures of the Bush Administration to adequately address any number of social, economic, and geopolitical problems, the dominance of Christian conservatives and their culture war values on choice and GLBT rights also plays a part, as does the fact that the Millennial generation is the most diverse, tolerant generation in history and the Republican Party is not at all diverse or tolerant.

But Frum is smoking something if he thinks his four-point plan can turn things around for the GOP.

Three of his proposals amount to nothing more than putting a kinder, gentler face on policies that a majority of youth roundly reject. I see little room for a pro-environment, pro-choice, multilateralist generation that believes in the power and obligation of government to protect and provide opportunity for its citizens to embrace a unilateral foreign policy, green washing environmental policy or a more compassionate anti-choice agenda.

But one recommendation sticks out among the rest and it deserves closer scrutiny.

Think Social Security taxes, not income taxes.

Today's young voters are paying much more in Social Security taxes than in income taxes — and contributing much more into Social Security than they will ever see out of it.

Republicans took a beating on the Social Security issue in 2005. But the issue is not going away. And Barack Obama's solution — taxing more income for Social Security — is neither workable nor popular. Personal accounts offer hope for personal wealth to a generation that is increasingly anxious about its economic future. With a relatively small subsidy — $300 per year for workers earning less than $40,000 — a revived Republican personal account plan could guarantee that every American worker would retire a millionaire, even if they never earn more in their lives than minimum wage.

Republicans will always face overwhelming disadvantages among blacks and Hispanics. President Bush's attempts to woo Hispanics via lax immigration policies disastrously backfired, alienating white Republicans without achieving gains among Hispanics.

But we can talk to young blacks and Hispanics as young people, who share economic interests with an entire generation of overtaxed young workers, regardless of race.

This is a common narrative heard not just among conservatives, who use it as their supposed "Ace in the hole" when talking to or about young voters, but also among progressives. During my book tour this question has come up a number of times. Yesterday at the Roosevelt Institution conference, Andrea Batista Schlesinger, the Executive Director of the Drum Major Institute, made reference to an alleged conservative view of Social Security reform among Millennials. I myself have fallen into the trap of believing that young people consider Social Security broken and privatization as the most viable option for "fixing" it.

After extensive conversations with some fellow youth leaders this morning, and a little bit of reading, I no longer believe that to be the case.

Back in 2005, the last time that this issue came up, Rock the Vote teamed up with the AARP to poll the electorate on the issue. Contrary to popular belief, they found that most young people did not support Social Security privatization if it entailed the dismantling of other parts of the social safety net:

Most Americans in the 18 to 39 age group, for example, say that they would flat-out oppose the accounts if, for example, it means that cuts to their guaranteed Social Security benefits would be so severe that they could not make up the difference with private accounts (70 percent say they would oppose) or that diverting some Social Security payroll taxes means "massive new federal debt in order to pay current benefits" (63 percent say they would oppose).

Pew SS PEW found similar results at the time, and also noted that the more young people knew about the details of privatization, the less likely they were to support it.

A number of young activists wrote about the subject at the time. Dana Goldstein, then of Campus Progress, actually debated a pro-privatization student and found that the pro-privatization student group, Students for Saving Social Security, was little more than an astroturf group.

At the time, Matt Singer, now of Forward Montana, and Heather McGhee, who is now working on Demos's Better Deal Conference, also wrote critiques of the supposed youth support for social security privatization.

Lest you think that my outdated statistics from 2005 are no longer relevant, let's remember that in 2005, a number of Gen Xers were still in the 18 - 29 catagory (and they made up a majority of the 18 - 36 cohort). Gen Xers have consistently been far more conservative than Millennials. If anything, these numbers have likely seen a vast improvement. Again, Rock the Vote's poll data can provide some help here.

In February of 2008, Rock the Vote released a new poll of young voters (18 - 29) (pdf). When asked what their top concerns were for the country, only 2% responsed that Social Security was one of their largest concerns. 0% of African Americans agreed that Social Security was a major problem, and only 5% of Hispanics. Now granted, there are margin of error issues in these numbers, but the point is, the numbers are so small that it is hard to see how this could turn out to be the Republican's "Ace in the Hole" to win back young voters.

At best, what we have in Social Security is the one issue in which we may actually have to engage the Republicans in serious debate among young voters. But research shows that once young voters become educated as to the details, and the consequences, of privatization, they readily abandon the concept. Considering the conditions of the stock market recently, this is a debate I'm more than willing to have.

Bookmark/Search this post with:
  • Delicious
  • Digg
  • StumbleUpon
  • Propeller
  • Reddit
  • Magnoliacom
  • Newsvine
  • Furl
  • Facebook
  • Google
  • Yahoo
  • Technorati
  • Icerocket
April 10th, 2008 3:24pm
Tags:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

Guaranteed Social Security Benefits: Make It So

Submitted by sanserve on Wed, 2008-06-18 08:14.

Guaranteed Social Security Benefits: Make It So

The comically complicated PSA (Personal Savings Account) legislation bouncing around Congress will raise taxes, increase investment risk, and expand the size of government. Let's stop applying Band-Aids to spouting arteries. We are looking for a guaranteed retirement benefit program, and organizations capable of providing one. Additionally, we want the new program to reduce taxes, create jobs, boost the economy, cut prices, and increase salaries. Difficult? Not really.

This is the conceptual outline of a five-year implantation plan, a starting point for the brainstorming needed to develop the nitty-gritty details, rules, regulations, laws, and agencies. All that is needed is the will to change things productively. Politicians like to debate changes to determine why new ideas can't be implemented. Here's a plan that must be implemented. Have a listen, throw out an incumbent, and protect your future.

Guaranteed benefit programs have been around for over 100 years, and millions of people throughout the world enjoy the benefits they provide. Here's how they do it. Every month, they deposit money into a trustee-managed investment account. The money avoids the stock market (for the most part), index funds, commodities, or MLM-like derivatives and is carefully invested in high quality debt securities, many privately placed for better yields.

All earnings are reinvested in similar securities, and the fund eventually produces more in earnings than the participating investors contribute; the trustee manages the portfolio. At retirement, the deposits stop and the guaranteed benefits begin. The benefit is guaranteed for life--- extraordinary concept, older and wiser than any living congressman or presidential candidate.

What if, instead of donating 7.6% of your salary (15.3% if you are self employed) to support the war de jour: (a) you could choose to deposit from 3% to 5% of your salary in a guaranteed retirement program maturing anytime after age 60, (b) the lifetime benefit is totally income tax free, and (c) your employer uses his savings to either create jobs, raise non-executive salaries, reduce prices, or increase shareholder dividends. Interested?

The SSRIA (Social Security Retirement Income Annuity) is a new and improved version of the ancient Deferred Fixed Annuity--- a boring but guaranteed fixed-amount-only retirement vehicle. (Wrong, I don't sell annuities--- they just happen to be the perfect Social Security problem solver.) There are a bunch of new wrinkles: (1) The minimum contribution is mandated for all employed persons, but anyone with a Social Security number can have a SSRIA.

(2) Qualified (15 years of Fixed Annuity experience) SSRIA providors are assigned to participants randomly by SS#--- only one per participant, per lifetime, please. Since the "qualified-by-qualified-people" providor companies have no acquisition, retention, or advertising expenses, there are no sales commissions; administrative expenses and investment management fees are capped at .5% of the total fund Working Capital.

(3) All SSRIA contracts, regardless of provider, will contain the same terms, interest guarantees, retirement benefit choices, and pre-retirement death benefits, thus eliminating any incentives for internal fraud and manipulation of statistics.

(4) Qualified providers will establish separate tax exempt, "mutual" subsidiaries to manage and control operations, assuring that profits are distributed to contract holders. Profits are allocated 50% to active contract holders and 50% to a health insurance trust fund for retired participants (HITF). (5) All providers will use the same mortality, investment earnings, and expense assumptions in their annuity benefit calculations, and only Life and Life + One Annuities are available. (6) Benefit payments will be jointly guaranteed by the parent companies and the Federal Pension Benefit Guarantee Corporation. Parent Company income taxes would be reduced by 50%.

Implementation would be completed over a five-year period, and interpreted with an "intent of the law" bias:

In Year One, the Federal Government would purchase single premium SSRIAs for all active Social Security recipients--- hey, they squandered the money. Also in year one: (1) all employee and employer contributions would be cut by 25% (the first of four such annual cuts) and deposited to individual SSRIAs. (2) All Federal, State and Local income taxes on SSRIA payments would be declared illegal and forever prohibited. (3) A private company would be chartered to audit the disposition of corporate tax savings within all public companies and private companies employing 10 or more persons 18 months before enactment.

In Years Two through whenever, the Federal Government would add to retiring persons SSRIAs to bring the annuity benefit to the level guaranteed by the OASI plus COLAs. Once an equalization level is achieved, federal responsibility would cease for that retiree.

In Years Three through Five, all Federal, State and Local Income taxes on all forms of private retirement accounts (IRA, 401(k), 403(b), etc.) would be reduced by one third per year, and would be declared forever illegal at the end of year Five. A Federal Sales Tax of 1% or 2% (on all final-product-sales, not a VAT) could be enacted after the second year's cut. From Year Three forward, SSRIA holders would be able to view their projected monthly benefit at various retirement ages, based on contract provisions and their deposit and earnings history.

By the end of the Year Five: (1) Employers would have no Social Security tax responsibilities, but would be responsible for either employing more people, reducing their product prices, raising non-executive salaries not subject to the minimum wage, or paying higher dividends to shareholders. Any manipulations of their operations or executive compensation packages clearly intended to circumvent the intent of these reforms would be fined appropriately within the Board of Directors, senior officers, and legal council of the Company--- personally, and in each capacity.

That's right, if a senior officer is also on the Board, and responsible for controlling jobs, product prices, or dividends, he or she would be personally responsible for three separate fines. (2) Employees would select their level of salary deduction for year six; the election can be changed once in any twelve-month period. No employee can contribute more than the maximum 5% of salary to an SSRIA.

Of course there are a lot of ifs, ands, and buts in here, but it is a clearly doable program within an established professional infrastructure. It will increase jobs, reduce taxes, boost the economy and reduce the role of government--- in 50,000 less words and 25 fewer years than any approach even being considered in Congress.

Make it so--- yeah, you!

Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"