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    The Freedom IRA – Stop Robbing from the Young to Fix Deceitful Government

    10/27/2012
    Democracy and Power 103:  Government money  

    In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other. – Voltaire (1764) 

    The Freedom IRA – Stop Robbing from the Young to Fix Deceitful Government

    Incredible!  Unions and socialists don't trust Obama on Social Security.   The Hill reports that a coalition of unions, interest groups, and socialists fear Obama will change Social Security.  Today and until the election, most of these groups are strong and active campaigners for President Obama.

    Immediately after the election, the coalition will hold a major media event  to stop President Obama from “tinkering” with the consumer price index, which determines the rate of government benefit increases.  Senator Bernie Sanders (VT), an avowed socialist, describes the coalition.  [Read:  Social Security Structurally Violates Freedom]

    You can have virtually all of the senior groups, you can have the unions, you can have some of the veteran groups as well coming on board,” said Sen. Bernie Sanders (I-VT), founder of the Senate’s Defend Social Security Caucus, who has been in contact with organizers.

    All of these special interest groups are protecting advantages bestowed by government.  Tragically, the government has not saved enough (if anything) to pay for future benefits.  In order for government to maintain its promise to every beneficiary, government must substantially increase taxes on present and future workers.  In reality, Senator Sanders seeks to Rob from the Young to Fix Deceitful Government.

    This is an inherent problem with all democracies.  Politicians pander and please their immediate constituents and push debt onto future workers.  Europe, the United States and most states have dangerous debt, which was substantially caused by fraudulent and mismanaged government retirement schemes.

    Thus, Sanders and associates are continuing what politicians always do to  protect their special interest constituents and kick the problem down the road.  Alas, Social Security will never – never – never keep its promises.  Social Security will never – never – never be secure.  Politicians cannot be trusted with workers' money. Only personal accounts owned by the worker will stop this disastrous government fraud of Rob from the Young to Fix Deceitful Government.

    The Freedom IRA:

    For freedom and prosperity to prevail in America, young Americans must make a grand bargain.  We must allow young American workers to put their entire payroll tax into an IRA.  That is 7.65% of their income.  In exchange for investing in their IRA, the worker forgoes any and all claims to Social Security, and contracts not to take withdrawals from their IRA until age 72.  We'll call this the Freedom IRA, which is would be in addition to all other forms of retirement accounts – 401k, Roth, private accounts and others.

    Additionally, this deal should be offered to every American.  Any worker that wishes to forgo Social Security – young, middle-aged and older – shall be allowed to opt-out of Social Security.  In order to greatly increase the opt-out rate, there would never be a tax on the money invested in the Freedom IRA if the benefits are withdrawn after age 72.  To be clear, everyone opting-out  would never be taxed – not prior to deposit or when withdrawn.

    Included in the Freedom Deal would be enticements for people currently 50 years and older to voluntarily delay receiving Social Security benefits until they reach age 72.  Again, the incentive would be no taxation on their Social Security benefits.

    The combination of young people opting out and seniors voluntarily delaying benefits would greatly reduce the cost of transition.  Most importantly, the Freedom IRA  will stop political deceit and manipulation.

    An enormous benefit to young Americans – our children and grandchildren – personal accounts will create a nest egg of 3 to 5 times larger than what Social Security currewntly promises.  Obviously, the individual worker would benefit as will America's economy with millions of workers saving and investing.     [View: an excellent video by Professor Antony Davies at LearnLiberty.com]   

    The Freedom IRA will greatly restore freedom and prosperity in America.

     

     

    Previous posts discussihttp://www.freedomworks.org/node/add/blogng Social Security:

    Social Security: Immoral Special-Interest Politics

    Social Security: Fairness for Young Americans

    Three Texas Counties Opted out of Social Security

    Social Security: Structurally Violates Freedom

    8 comments
    Mike Williams
    11/12/2012

    Tedd, your statement "This is an inherent problem with all democracies" is a bit confusing. Thye last I checked the United States was never a 'Democracy'. It was and always has been a Consitutional (representative) Republic. Can you clarify please?

    Fix Social Security Now
    10/28/2012

    Ted, Let's be honest. If you allow people to leave Social Security, everyone would. How would you pay for the benefits of the existing retirees?

    Let's be clear : If by Freedom IRA you mean that you would let Social Security die, you should say it. The Trust Fund could serve the needs of Social Security for three years. Is that what you mean? I am guessing not. If you mean that you will 'phase-it-out', you need to be clear about how you would pay for it.

    The dishonest answer is to say that we are going to eliminate waste. The fact is that savings from lower spending should be used to control the deficit and paydown the debt. You aren't paying for legacy costs. You are simply shifting the tax resources away from deficit control to finance the legacy costs. This isn't eliminating waste - it is preserving debt and more likely increasing it.

    If you are simply shifting financing from payroll taxes to income taxes, you need to make sure that younger voters understand that you want to increase the size of the program without telling anyone. With Bernie Social Security is bounded by payroll taxes. In your case, the system has unbounded access to the general fund. If you continue to pay for benefits with income taxes, the only thing that people 'opt-out' of is future benefits.

    Fix Social Security Now
    11/01/2012

    "Freedom IRA allows everyone to voluntarily exit the present Social Security scheme. "

    Without telling me that I do not have to pay transitional costs, I am not really exiting. We aren't making a grand bargain. We are jumping into the unknown.

    The obvious question here is why hasn't the analysis been done. The FreedomIRA will create an adverse selection process on Social Security where high-wage, single people leave; leaving the system in greater problems. Social Security doesn't work with a gun to your head. Why do you think it will work when contributors leave. Who do you think will get stuck with the tab when it fails. You see this as ownership. I see it has shifting deckchairs on the TItanic so that you can make room for more passengers.

    Who am I? I am a guy who doesn't think Social Security works. It is a timebomb waiting to explode. It creates the poverty in the elderly that it is suppose to alleviate. It has an embedded trapdoor of support - the voter who can vote lower support at anytime. Once you let people leave, there is no exit point for the voters. They are just stuck with the bill.

    Fix Social Security Now
    11/01/2012

    "Known, if no reform occurs, the taxpayer will be heavily taxed, which will adversely impact economic growth for the taxpayer and the nation. "

    I have a less optimistic view of Social Security than you do. I suspect that over time voters will simply get tired of failure, and reduce it to a welfare program on less generous terms.

    We are close to this point than most realize. The payroll tax-holiday isn't a tax cut. It is a tax shift from the covered worker to the general taxpayer. People are fed-up with the high cost of Social Security today. So the government is shifting it to where it is less visible. I don't think it will work. The man who ran Social Security in 1944 predicted this in Congressional testimony, let me know if you want the link.

    We probably aren't having the same discussion, here. Social Security is on course to reach 100% of government revenue. You are worried that it might. I have left that discussion to start one that is about how Social Security will not reach that level of spending, and the impact on beneficiaries when it doesn't.

    teda's picture
    Ted Abram
    10/29/2012

    I agree with your concern for the taxpayers. Known, if no reform occurs, the taxpayer will be heavily taxed, which will adversely impact economic growth for the taxpayer and the nation. Next, to address your concerns... wait, who are you? Anyway, the Freedom IRA allows everyone to voluntarily exit the present Social Security scheme. The person exiting would forfeit all money paid into Social Security and forgo any SS benefits. This alone would greatly change the obligations of the Social Security. In addition, a voluntary extension of receiving benefits by people 50 and over would substantial reduce the short term obligations by government. This substantially alters all the statics you mention. This is the reason I wrote, “The transition borrowing, if any, depend on a multitude of variables and assumption, which will be tested, and an extensive analysis will be studied and published.” Then young Americans will decide to stay with the corrupt and terrible financial return of Social Security, or will make a grand bargain for ownership and control of their future.

    Fix Social Security Now
    10/28/2012

    "For example government in 1983 for the first time taxed Social Security benefits, reducing the value of benefits by 15%."

    Correct me if I am wrong, but Social Security benefits are not taxed. They are subject to a means-tested clawback based on other income. It is collected by the IRS, but the government can't spend a penny of it. The revenue is returned to Social Security.

    This is a huge problem that no one is talking about. We complain about the 47% who pay nothing, but the number of people who are trading income-tax producing jobs for income-tax sheltered retirement benefits is exploding. So the 47% is going higher...

    Fix Social Security Now
    10/28/2012

    My issue is the honesty of the debate. I do not argue for or against any reform, but I want voters to see the issue honestly.

    I am not denying anyone the right to exit Social Security. I am saying that if anyone leaves that person shouldn't be penalized by those who stay. An opt-out means I leave. It is not full disclosure to say that you are letting them leave, without disclosing the fact that they will now pay for Social Security through their income taxes.

    How do you justify for example penalizing the workers of Galveston County? They have nothing to do with Social Security, but you would ask for them to pay income taxes for the system from which they cannot collect.

    Calling it an 'employer co-pay' isn't full disclosure when employers lower the wage that they will pay an employee to pay for the employer co-pay. Workers are still paying for something from which they can't collect.

    "The transition borrowing, if any, depend on a multitude of variables and assumption, which will be tested, and an extensive analysis will be studied and published"

    The Trustees say that the shortfall is 20.5 trillion. AP more recently said that it is 30 trillion. Once you have zero dollars coming into the system, you will be looking at close to a trillion dollars of outflow every year. So the pass through expense for the worker is more than his Freedom IRA. He is standing still.

    My problem with what you are saying is that making Social Security bigger is not the answer. I have never seen more government as the answer. Increasing Social Security's revenue reach beyond capped-wages is just scope creep.

    After the Freedom IRA, who is responsible for the mess that Social Security will become. The taxpayer.

    teda's picture
    Ted Abram
    10/28/2012

    “Ted, Let's be honest. If you allow people to leave Social Security, everyone would.” This is exactly the purpose of the Freedom IRA – choice between a corrupt government system and a personal owned account. Next, you are denying every worker (especially the young and the unborn) the freedom to exit a Social Security system that pays approximately a 1.6 % return, versus savings which will pay 3 to 5% to retirees. Also, ownership, gives every worker the opportunity to pass the savings on to family, friends and charities. Again, see a video by Professor Antony Davies at LearnLiberty.com] Additionally, ownership will stop government from raiding Social Security benefits. For example government in 1983 for the first time taxed Social Security benefits, reducing the value of benefits by 15%. This is of course the reason Senator Sanders suspects President Obama will change the CPI calculation, that will reduce the cost of living increases. Obviously, from your comment personal freedom and ownership are secondary to how to pay for the present beneficiaries. The combination of voluntarily extending the retirement age to 72, the exodus of every worker (as you stated) and maintaining the employer co-pay of 7.65% reduces government's future obligations – near and especially long term. The transition borrowing, if any, depend on a multitude of variables and assumption, which will be tested, and an extensive analysis will be studied and published. Your response – especially the universal opt-out – greatly assists in making assumptions to model a transition to personal accounts, which will also preserve Social Security for present recipients and any worker that wishes to remain. Thank you.

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