Chapter 2- Social Security A better plan A better plan People support People support Personal Retirement Accounts Personal Retirement Accounts Bush won on it in 2000, 2004 Bush won on it in 2000, 2004 Even Bill Clinton recognizes it Even Bill Clinton recognizes it 1995 advisory committee 1995 advisory committee Washington Post Washington Post Will encourage savings Will encourage savings

Liberals Liberals Oppose private markets Oppose private markets They are dishonest They are dishonest – 1% from employer and employee – Up to $60…raised in 1950 to $90 – Age 65

“Fixes” “Fixes” in 1977 and 1983 Pay as you GO… – Redistribution of wealth – Government borrows surplus today

Long Term Problems – A 50% tax increase required to meet obligations – 20% tax rate – A deficit coming in 2018… – $8,000,000,000,000…TRILLION obligation – Need more people in US to meet need… – Baby Boomers about to retire… – Declining birth rate – Immigration would help

Demographics People are living longer – Men-61 today 74 (79) – Women- 68 today 79 (83) Soon will be 2-1- retirees to workers Now 3-1 Europe already has this problem

Social Security (BAD DEAL) – Below market return – Free markets have historical solid returns – 7%-9% for stocks – 3.5% for bonds – Social Security 1-1.5% For some even worse – African Americans hurt most – Hispanics most likely to lose out

Raise taxes or cut benefits Democrats/Liberals – Trading a GUARANTEED benefit for a POTENTIAL one…

New Plan Personal Pass along to family Return would be 2x Social Security Help the economy Increase savings rate

Current plan will not work without Taxes/cuts Liability in the trillions New Plan would cut rate to 2% on both employer and employee over time Now still pay 6.4% each, but now in your own account

Grow the economy Ownership stake Invest in companies Guaranteed as opposed to current plan that calls for tax increases and/or benefit cuts Will put less money in the governments hands Please FDR and Reagan