Two Cheers for Mr. Thompson: His Social Security plan isn't perfect, but it confronts reality.

The Washington Post ^ | November 16, 2007 | The Editors

[2ndDivisionVet]

FRED THOMPSON may have come late to the presidential race, but the former Tennessee senator has produced the most courageous proposal of the campaign. Mr. Thompson's Social Security plan is not as progressive or as balanced as we would prefer. Yet in a campaign in which candidates have preferred to dodge difficult choices on Social Security, Mr. Thompson's proposal has attractive elements and deserves applause for making some tough choices.

Mr. Thompson would cut benefits for future retirees from the unsustainable amount currently promised; he would combine that move with voluntary private accounts sweetened with a generous match from the federal government. Mr. Thompson points out, correctly, that by 2041, Social Security will be able to pay only about three-fourths of promised benefits, but he assumes -- as do his fellow Republicans -- that the burden of solving the problem should fall exclusively on the benefit side. This thinking is as faulty as that of Democrats who assert that all promised benefits are sacrosanct.

Mr. Thompson proposes to change the way initial Social Security benefits are calculated by linking them to the increase in the cost of living, rather than the growth in wages, over the course of a worker's career. Because wages tend to grow faster than prices, under current law each generation is promised more generous benefits than its predecessor. There is logic to changing the system so that workers across different generations receive the same benefit in dollar terms. But such a change means that benefits over time would replace an increasingly smaller share of workers' pre-retirement income; it would be better to do that in a more progressive fashion that preserves a decent standard of living for workers at the bottom.

[chesty_puller]

The Post said this?

[Vigilanteman]

You know, I was really beginning to warm up to Fred. But if the Washington ComPost likes him, there has got to be a serious hidden defect.

[businessprofessor]

I do not understand the government match part of his proposal. A government match is just another entitlement. Ifthe match comes from reduced payroll taxes owed, it is not an entitlement but a tax reduction in exchange for lower benefits.

[2ndDivisionVet]

"The Post said this?"

Now that he is "safely out of the race" and down in the polls they can be nice to him, I suppose. I think they are underestimating his endorsement by the National Right To Life Committee.

[2ndDivisionVet]

See my #5 post.

[ari-freedom]

I would forget about “private accounts.” Just cut the payroll tax and you’ll get more payrolls. Reduce the benefits as well.

[DemEater]

Cutting benefits is a good start. What’s up with the government matching contribution to an elective account? Pretty socialistic.

[2ndDivisionVet]

Why not transform the whole thing to a 401k type set-up for anyone under 57 yrs old?

[rabscuttle385]

That is where the sweetener comes in. Rather than private accounts financed by diverting payroll taxes from the existing program, Mr. Thompson would offer add-on private accounts. Unless workers opted out, 2 percent of the wages they earn that are subject to Social Security tax (up to $97,500 this year) would be deposited into private accounts.

Would that 2 percent come out of the 12.4 percent already paid by individuals (6.2 percent each from employer and employee)...or would it be in addition to the regular Social Security taxes already withheld each pay period?

And, Social Security is only one head of a snake with many more: federal government spending run amok. I have not had much time lately to read on Fred's Web site, so if another FReeper would care to enlighten me as to how Fred proposes to deal with excessive federal government spending (in general), I would be most grateful.

[SaxxonWoods]

This is a great move by Fred. He is challenging the other candidates to discuss the issue that no one wants to touch. His proposition is a good starting point, and that’s all it needs to be, for now.

[freekitty]

I worked a long time for this money. Why should the retirees have to suffer because our government has been stealing our money. Make the people who stole it pay for retirement.

[knarf]

Uhhhh ... why not just go back to that idealistic concept of a trust fund ?

As I understand it, there USED TO BE a trust fund, until Johnson closed the account and moved all funds into the general budget. From there it was an Amway type of of payout to all those that were 'brought into' the program. The problem was, and is ... there is no volunteering but a forced participation.

Let forced participation of SS funds go into a real, live account that accually generates some kind of interest ... then, at some point in a contributor's life ... 35, 40 years of age maybe ... give him or her the option to opt out, take a very reduced, but guaranteed monthly check (15% ?) and allow him or her to then make their own decisions about their retirement.

This would provide SS funds for SS purposes and also allow those that have 'made it' in life to invest on their own, their own money.

Once you opt out .. you can't go back in ... but you still have that 15% check for life.

[billbears]

there has got to be a serious hidden defect

There is. Beginning with this plan

move with voluntary private accounts sweetened with a generous match from the federal government

Just another renamed entitlement program from the federal government.

[Plutarch]

Two Cheers for Mr. Thompson...

Only two cheers for Fred?

Be careful, 2DivVet. Management may deem this article insufficiently Pro-Fred.

[ellery]

Excellent! I love that the Post is forced to admit that it’s courageous to address entitlement reform (after complaining about it and blaming it on Bush for seven years).

The fact that Thompson’s plan isn’t as “progressive or as balanced” as the WaPo would prefer is another point in his favor!

[gpapa]

The government match is similar to the match given in the federal government’s Thrift Savings Plan. It is also similar to private 401K plans offered by employers, which provide a similar match at rates of 25-100% of an employee’s contribution. I do not know if the 2% match suggested by Fred comes from the employer matched amount for Social Security payroll deductions.

[ellery]

The lure of the accounts is that the government would match, on a 2 1/2 to 1 basis, contributions from the first $1,000 of wages each month; for contributions from wages above that amount, the government would match 50 cents for every dollar contributed. For those who chose to participate in the accounts, however, their guaranteed benefits would be further reduced -- about 30 percent over the course of a career -- or they would have to work an additional five years beyond the current retirement age (now 67) to receive full benefits. Over time, Mr. Thompson argues, this is a good bargain: Workers would probably accumulate significant nest eggs, more than offsetting the reduction in benefits.

[WFTR]

I still haven't had a chance to review the big plan on Fred's website, but I like the idea of indexing benefits to cost of living rather than wage growth. The government matching contributions to an add-on private account doesn't appeal to me. This idea would complicate the system and lead to more troubles than it is worth. The essential fact of the system is that this Ponzi scheme has to change or crash at some point. By calculating benefits differently, the indexing idea can change the cash flow and may be able to keep the system more solvent. Either way, I applaud Mr. Thompson for offering a new idea to the debate.

Bill

[LeoWindhorse]

I have never been wild about Fred Thompson . Of course if he was by some chance nominated by the Republican Convention I would certainly vote for him.
However , his standing in my mind really dropped thru the floor tonite when I received the following from a Thompson supporter here on FR , using confidential Freepmail :

Last Warning
From Im4Fred | 11/15/2007 12:20:09 PM HST new

hello, this is a friendly reminder that you have not yet contributed to FRed’s campaign this month.

Please take the time to do so now:

https://www.fred08.com/contribute.aspx?RefererID=c637caaa-315c-4b4c-9967-08d864cd0791

And remember, we are coming down the final stretch and we must all rally behind FRed. Now is the time to say NO to RINOS like Duncan Hunter and Mitt Romney. Any show of support to these socialists is now expressly prohibited on FR and transgressors will be banned. Just ask Pissant:

http://www.freerepublic.com/focus/f-bloggers/1925333/posts

Best FRegards

With FRed to the Victory !!!

I have NEVER expressed support for Thompson .
I am a Hunter supporter and frankly I find this quite offensive.
Ever gotten unsolicited e-mail from the Edwards campaign?
This here note is about on the par with that...
Anyone else being harrassed like this ?