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To: Hawkmoon who wrote (2868)	1/4/2001 8:04:47 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 3536

Ron - ...Bush, and the bi-partisan Senators who first authored his SS reform plan, has the right idea. And that is simply to permit taxpayers to take 2% of their 15% FICA taxes and divert it to an accredited IRA plan. It would provide them real ownership of a hard asset, as opposed to being a recipient of a government entitlement that future taxpayers are burdened to pay for.... I have my doubts about this, as partial privatization is like partial pregnancy. The sooner the SS system disappears from the face of the earth the better, while keeping existing promises, but I suspect that this plan, if it is ever detailed, is not a great step forward. First of all the plan could not be a permanent 2% shift, but only for as long as the FICA receipts are in surplus, exceeding current SS payouts. Secondly, I would need the following argument refuted - The return on the private investment would either be greater or less than the payments due from the normal plan. If it is less than, there is no advantage to either the individual or the system as a whole. If it is greater than, the question is whether the excess returns are allowed to be reaped by the individual, or whether his normal payments are just replaced. If his normal payments are just replaced, then the plan makes no sense to the individual as he risks a loss with no real prospect of any net gain. If, on the other hand, he is allowed to keep his excess returns, the solvency of the system itself has not been improved in any way. In my view, the system should be privatized completely, with current and near term future recipients awarded guaranteed annuities for the mandated benefits. Alternately, the only action that can really use current FICA surpluses to actually improve future SS solvency is for the government to ask for bids on future annuities that would augment the future payout streams. Financial companies of all stripes could sell such products to the government in a competitive environment, and the economic support would come from a portfolio mix of equities and bonds, corporate, municipal and/or treasury. This might well have a similar interest rate reducing effect as the paying down of debt, as it will increase demand for the treasury securities. Regards, Don