James Pethokoukis, writing for AEIdeas, had one, and I have some thoughts on his thought.
Pethokoukis first:
To counter the anti-growth impact [of Americans’ of increasing lifespan and falling birthrates] you would need (a) greater labor-force participation, (b) higher birthrates, (c) greater innovation so each worker is more productive.
To which I add, (d) higher immigration rates with better assimilation into American society. We need more folks, with their fresh ideas, their initiative, their drive, their (conservative) family values and sense of responsibility, all of which are amply demonstrated by the lengths to which they go to get here.
Second [citing colleague Andrew G Biggs, who was writing in National Affairs], “Social Security’s government-provided benefits would be transformed into a flat universal benefit mean to improve social-insurance protections for low-income Americans.”
The short question is how to handle the erosive effects of inflation. That’s only partially, and hopefully, addressed by Biggs’ view that this would grow over time with wages. But there’s a larger problem, it’s in Biggs’ article, and it’s one that Pethokoukis missed.
The two parts of Biggs’ solution are these. First, enroll all workers in an employer-sponsored 401(k)/403(b) type device, with the employees required to contribute, say 1.5% of their pay and employers required to match that dollar for dollar. Second,
Social Security’s government-provided benefits would be transformed into a flat universal benefit to improve social-insurance protections for low-income Americans. … Each American reaching the normal retirement age would receive a benefit set at the poverty threshold for individuals over age 65….
The larger problem involves both of these, and both are solved by privatizing Social Security and making each person’s payments go into a retirement account for the payer’s future retirement rather than for strangers’ current retirement (they’re not even specifically for the payer’s parents’ current retirement).
We’re used to paying 6.2% of our payroll tax into social security. Pay those 6.2% instead into a retirement plan (401(k)/403(b), Traditional or Roth IRA, etc) whose proceeds are for the sole benefit of the payer, and which accounts are under the sole control of the payer, for his own future retirement. Also, remove the income and contribution caps. So what if the better off can pay in more in than can the less well off? Those larger payments in no way hurt the less well off, and the increased consumption available to those better off is good for the economy—and everyone else. Next, free the employer from the matching payroll tax altogether. The employer will benefit from that reduction in labor cost and can use the money to make the business more competitive—including matching employee retirement contributions as a competitive device—which will be good for hiring.
This makes each worker responsible for his future welfare, and he’ll do a better job of taking care of that than the government can, as demonstrated by Social Security’s current fiscal straits. It also eliminates the need for Biggs’ flat benefit for the less well off. Their own retirement accounts, allowed to accrue for their future benefit instead of being paid out immediately as Social Security does now, and at a faster rate than Biggs’ alternative, does the deed.
