While I disagree with his solutions K is opposed to the Bush plans. "If I were holding bonds, I'd be very nervous,'' Kotlikoff adds. ``He (Bush) seems geared up to make an extremely bad fiscal situation worse by cutting Social Security taxes,'' Kotlikoff says.
Bush has proposed peeling off 2 percent from existing payroll taxes [most discussions revolve around more recently] to fund private accounts that retirees would control and manage on their own. ``I agree with the president that we need to radically reform the Social Security system, but it needs to be done in a fiscally responsible manner,'' Kotlikoff says. How would he define ``responsible''? He favors introducing: -- A federal sales tax to ``pay off the Social Security benefits owed under the old system.'' [idiotic- left as an exercise to someone with more time what that sales tax would have to be,and what the economic effect will be - my first estimate is an additional 12% fed sales tax on top of existing sales taxes.] -- Replacing the current payroll tax with ``equivalent compulsory contributions under the personal security accounts.'' [ignores that SS is not a retirement account] -- Individually owned, low-expense accounts within Social Security would be offered and all be automatically invested in a global index fund of stocks, bonds and real estate so that ``everyone would get the same return.'' -- The government would match contributions into the accounts for those who are disabled or unemployed. The funds would be converted into inflation-protected pensions between the ages of 57 and 67. [Netherlands had a simpler solution - not funded by wages and not linked to wages, everyone gets roughly $1,000 a month for singles, $1400 for couples, and a bonus $700 each year after they turn 65 and a gambling tax supports other elderly programs] Medicare Reform Since Social Security and Medicare are both funded with a payroll tax, Kotlikoff suggests that they need to be addressed in tandem. His proposals for Medicare reform, called a ``medical security system,'' are even more radical. His Medicare overhaul includes scrapping the present fee-for-service system and replacing it with vouchers to purchase health insurance, mandatory basic coverage and prescription drug benefits. The voucher amounts are set according to the recipients' medical condition and would be indexed to real wages (earnings after inflation). [This should be the real debate] http://www.bloomberg.com/apps/news?pid=10000039&sid=a9A9X6CrGgoA&refer=columnist_wasik Kotlikoff would replace Social Security by a personally funded pension system with greatly reduced benefits, undoubtedly increasing poverty and insecurity among the old. They would replace Medicare with a weird voucher scheme for private medical insurance, which would require the government to keep complete and timely records of everyone's health. They would abolish the payroll tax and impose a regressive national sales tax, spreading the cost of paying for their own retirement benefits to the elderly and also to the poor. As in a Bushite's wet dream, no tax they propose would touch the cash holdings of the rich. One of the interesting things in all the projections for 2075 is that the average worker in 2075 will have three times the income he does now. (1.7 percent annual productivity gain), This can even be seen reflected in those projected 23% cuts in Social Security if outgo exceeds income in the 2040's or 50's and with reduced benefits because of no new funding it still results in benefits greater than todays. Gary Denton _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
