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Dear woodbeez,

"Because people don't understand how SS really works is not argument against a NST. That is an argument for teaching basic economics."

No, the argument against the NRST isn't that folks misunderstand how Social Security works, but that the NRST will HIDE the costs of Social Security incurred by individuals even more than the current payroll tax method.

Which will reduce the likelihood of reform.

"Now, payroll taxes and income taxes are not, in reality, in separate 'accounts'. It is all lumped together to pay both the cost of SS and the rest of government."

Well, not precisely. The Social Security payroll tax revenues are first applied to the current obligations of the system, and then the remainder of these taxes are borrowed by the federal government for use in the general fund. The Social Security Trust Fund does receive back special Treasury bonds for the surplus payroll taxes collected.

These ARE legal obligations of the United States.

However, they're merely future claims on the taxing authority and capacity of the United States, and when combined with all the other claims on and requirements of the taxing authority and capacity of the United States, it becomes clear that the long-term future combined accumulated claims and requirements are unsustainable.

If we went with the plan that merely returned each year's surplus to current payroll taxpayers, individually, in individual privatized personal retirement accounts, these individuals could invest in equities of companies where their shares would represent real current value, and a realistic opportunity for real growth and real future value, rather than an undifferentiated share of a promise that will become unsustainable possibly within another 15 or 20 years, requiring significant reduction of the promise.

Of course, Congress would have to figure out what to do about the fact that it just lost a hundred and some billion dollars of "stealth" borrowing capacity. They'd either have to cut the budget, or honestly raise taxes, or see the true deficit revealed, in the range, right now, of $500 or $600 billion.

This wouldn't really amount to privatization, but it would force Congress into dealing more honestly with the current surplus, the current real deficit, and the longer-term implications inherent in the system.

And this is all partially enabled because folks see the 7.65% coming out of their checks, and a significant number (a large minority? a small majority?) realize that the another 7.65% that would be available to them comes out of the employer side. People relate the whole cost of Social Security back to a specific line item on their paychecks.

Under the NRST, it becomes more of an abstraction. Folks know that some part of that 30% sales tax is going to Social Security, but there's nothing every pay period reminding them of just how much it is, and how much it means to them in the aggregate.

There's no annual piece of paper (W-2) that makes clear their total annual contribution. And with the W-2, many are smart enough to double that line item, and realize just how much on an annual basis it's costing them as individuals.

"Once everyone has control of their forced retirement funds, the SS portion of a NST would disappear."

Because it's hidden entirely in the NRST, I believe it's more likely that it would be more difficult to create the political environment to obtain privatization.

As well, unless some mechanism is derived to force the on-going accumulation of those retirement funds, it's difficult to see either how the NRST would achieve it, or how it could be taken out of the NRST.

If you believe that individuals should still be required, by law, to accumulate those funds (and I do believe that, because I recognize that without a mandatory program, a significant number of folks will not do what they need to, and those millions of old and poor people will eventually, through the political process, make claim on my assets, for which I've worked hard and saved scrupulously), then actually, you need to leave in place some method to obtain the funds directly from the income of wage earners.

Thus, it's likely that under a mandatory, privatized, individual Social Security retirement account system, employers will still be obligated to deduct the forced savings from workers. These amounts won't have to be sent to the IRS, but rather would be sent directly to the investment broker of the employee's choice. However, federal reporting and auditing, to assure workers' rights, would probably be retained. Thus, part of the mechanism of the income tax would be required to implement a mandatory, privatized Social Security retirement account system.

With only the NRST mechanism in place, we'd be unable to implement a mandatory privatized Social Security retirement account system.

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