The Case for Social Security Personal Accounts
There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely caused by demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform.
Social Security reform received a good bit of attention in the past two decades. President Clinton openly flirted with the idea, and President Bush explicitly endorsed the concept. But it has faded from the public square in recent years. But this may be about to change. Personal accounts are part of Congressman Paul Ryan’s Roadmap proposal, and recent polls show continued strong support for letting younger workers shift some of their payroll taxes to individual accounts.
Equally important, the American people understand that Social Security’s finances are unsustainable. They may not know specific numbers, but they know politicians have created a house of cards, which is why jokes about the system are so easily understandable.
President Obama thinks the answer is higher taxes, which is hardly a surprise. But making people pay more is hardly an attractive option, unless you’re the type of person who thinks it’s okay to give people a hamburger and charge them for a steak.
Other nations have figured out the right approach. Australia began to implement personal accounts back in the mid-1980s, and the results have been remarkable. The government’s finances are stronger. National saving has increased. But most important, people now can look forward to a safer and more secure retirement. Another great example is Chile, which set up personal accounts in the early 1980s. This interview with Jose Pinera, who designed the Chilean system, is a great summary of why personal accounts are necessary. All told, about 30 nations around the world have set up some form of personal accounts. Even Sweden, which the left usually wants to mimic, has partially privatized its Social Security system.
It also should be noted that personal accounts would be good for growth and competitiveness. Reforming a tax-and-transfer entitlement scheme into a system of private savings will boost jobs by lowering the marginal tax rate on work. Personal accounts also will boost private savings. And Social Security reform will reduce the long-run burden of government spending, something that is desperately needed if we want to avoid the kind of fiscal crisis that is afflicting European welfare states such as Greece.
Last but not least, it is important to understand that personal retirement accounts are not a free lunch. Social Security is a pay-as-you-go system, so if we let younger workers shift their payroll taxes to individual accounts, that means the money won’t be there to pay benefits to current retirees. Fulfilling the government’s promise to those retirees, as well as to older workers who wouldn’t have time to benefit from the new system, will require a lot of money over the next couple of decades, probably more than $5 trillion.
That’s a shocking number, but it’s important to remember that it would be even more expensive to bail out the current system. As I explain at the conclusion of the video, we’re in a deep hole, but it will be easier to climb out if we implement real reform.
I have exciting news this morning. I am launching a campaign to recall Illinois governor Pat Quinn.
This is not a frivolous effort. It is a serious undertaking and one in which I intend to see to the end. It will take hard work and lots of volunteers but we will be successful.
I need volunteers to ...
- Gather signatures
- Talk to state legislative representatives to get them on board
- Provide legal help
- Design a website
- Help with advertising
I will pay for website hosting and domain names.
We need to be successful because Governor Quinn has plans that will destroy Illinois.
Massive Tax Hikes Will Drive Businesses Out Of Illinois
The Chicago Tribune reports Governor Quinn has reached a deal with top Democratic lawmakers including Senate President John Cullerton to ....
- Hike the state income tax by 75%, from 3% to 5.25%
- Hike the corporate income tax rate by 75% from 4.8% to 8.4%
- Hike the cigarette tax by $1 a pack
- Use the tax hikes to borrow more money to fund pension plans
The Tribune notes "As a measure of how desperate state government's finances are, Cullerton said the state would use the income-tax hike to borrow $12.2 billion. Of that, $8.5 billion would pay overdue bills and $3.7 billion would cover a government worker pension payment lawmakers skipped when putting together the current budget, he said."
Raising corporate and personal income taxes to borrow $12.2 billion is not "desperation", it is fiscal insanity. It will drive businesses out of Illinois and push many struggling taxpayers into bankruptcy.
Quinn is unlikely to get all of those measures passed, but it does not matter. Those are his intentions and they they show his blatant incompetence and disregard for both taxpayers and businesses. Moreover, he will try again.
Enough Is Enough
John Tillman at the Illinois Policy Institute says ...
Amazingly, the deal will also hike the corporate income tax rate. Combined with the personal property replacement tax and the federal corporate tax, Illinois would have one of the HIGHEST corporate income tax rates in the world. You don't have to be a rocket scientist to figure out this means bad news for job growth in Illinois.Indiana Governor Mitch Daniels On Quinn's Plan
With high property taxes, high sales taxes and now high income taxes, the flight to low-tax states will only pick up speed.
Enough is enough.
The Illinois Policy Institute is not the only one who thinks Governor Quinn's proposal would be horrid for Illinois. So does Indiana Governor Mitch Daniels according to The Northwest Times of Indiana.
"We already had an edge on Illinois in terms of the cost of doing business, and this is going to make it significantly wider," Daniels said.Indeed, people get what they vote for, but how did Quinn win?
The Tax Foundation, a nonpartisan tax research group in Washington, noted if the proposed corporate tax hike becomes law, Illinois businesses will pay the highest combined national-local corporate tax rate in the industrialized world.
That is the wrong course for Illinois to take, Daniels said.
"It does show that you can make very different choices, and the contrast between the choice we've made and the one they have is stark," he said. "Obviously I think ours is wiser, but self-governance means people get what they vote for."
Governor Quinn Bought The Election
Governor Quinn barely won the election against a very weak opponent in spite of an amazing 85% vote turnout for Quinn in Chicago. Sadly, Mayor Daley did nothing to stop this, although the mayor is complaining mightily now about the Governor's proposals.
“It’s worth remembering that Governor Quinn only found one program—out of thousands—to veto outright when he signed this year’s spending bill in July. Had he taken a closer look at structural spending reforms and not agreed to politically motivated “no layoff and closure” deals with public employee unions, we could be on the path back to recovery instead of being stuck in ever-mounting debt,” noted John Tillman at the Illinois Policy Institute.
Those "no layoff" agreements bought Quinn votes. So did other union-pandering deals. It did not matter that Illinois could not afford those deals. Quinn did what he could to get elected, taxpayers be damned.
There still is no serious discussion from Quinn as to how to rein in exorbitant taxpayer giveaways to public unions. His only "solution" is to raise taxes.
Four Big States - Four Big Problems
California, Illinois, and New York all have massive fiscal problems. They all have other things in common.
- Collective Bargaining
- Prevailing Wage Laws
- Illinois, California, and New York are NOT "Right to Work" states
In essence, Public unions own Illinois, California, and New York.
New Jersey Governor Chris Christie is starting to turn things around. Wisconsin and Ohio also have newly elected governors willing to take on public unions.
In Illinois, Governor Quinn remains beholden to public unions, not taxpayers, in spite of massive voter rejections nationally of tax-and-spend policies.
Organized labor contributed mightily to his campaign, and Governor Quinn wants to pay them back. His proposals will do that by taking money out of your pocket so that the public unions get wages and benefits that most taxpayers will never see.
Quinn bought the election, even if barely.
Constitutional Amendment To Recall Governors
Last November, Illinois voters were presented a chance to vote on a constitutional amendment allowing governors to be recalled. I am pleased to report the Illinois Governor Recall Amendment Passes With Two-Thirds Of Vote.
The Illinois constitution was changed last night, with an amendment swept in by a wide margin.What Does A Recall Effort Take?
Over two million voters approved a process for the public to recall governors during their term, giving the measure well over the 60 percent of voters required for its passage. The amendment is widely viewed as a reaction to the corruption charges against former Governor Rod Blagojevich.
- A voter has to file an affidavit stating his or her intent to circulate petitions to recall the governor. The affidavit cannot be filed until after the governor has served six months in office.
- Permission from lawmakers: The affidavit has to include the signatures of 20 members of the Illinois House and 10 members of the Illinois Senate. Half of the signatures from lawmakers have to be from Democrats and half from Republicans.
- Petitioners have to gather signatures equal to 15 percent of the number of people who voted in the last gubernatorial election.
- Of those signatures, organizers would have to get at least 100 signatures in each of at least 25 different counties. Petitioners would have 150 days to get them and the State Board of Elections would have 100 days to certify them.
- When would the recall election be held? No later than 100 days after the State Board of Elections certifies the signatures.
- Passage: A majority of voters have to vote to recall the governor in order for him or her to be removed.
- Who becomes governor: If the governor is recalled, the lieutenant governor becomes acting governor until a special election is held. If there is no lieutenant governor, the attorney general becomes acting governor. If there is no attorney general, the secretary of state becomes acting governor.
- Special election: A special election to select a new governor has to be held within 60 days if the governor is recalled. That process starts on the day of the recall election if multiple candidates from the same political party file for the office. If that’s the case, a special primary election would be held on the same day of the recall election. Candidates must gather 5,000 signatures in order to run in the special election. The new governor will serve for the unexpired portion of the recalled governor’s term.
- The Better Government has noted that nothing in the amendment prevents the recalled governor from running in the special election after he or she is recalled. It also noted that the amendment does not require grounds for recall.
The above bullet points are from the State Journal Register.
Note that the amendment does not require grounds for a recall, but we have them: Blatant fiscal incompetence and vote buying.
The state House of Representatives consists of 118 representatives elected from individual legislative districts for a two-year term with no limits. The Illinois Senate is consists of 59 senators with staggered two- or four-year terms.
Thus, getting approval from 20 members of the Illinois House and 10 members of the Illinois Senate (half from Democrats and half from Republicans) is not a prohibitive task.
Governor Quinn Supports Recalls
It is a fitting sense of irony that Governor Quinn Trumpets Recalls.
"I think the ultimate way to get ethics in Illinois is have the power of recall in our constitution," Quinn said.
I could not possibly agree more with Governor Quinn. It is perhaps the only major political stance he has taken that I can endorse 100%.
Will You Stand Up To The Injustice?
We have to wait six months to file, but there is no sense in waiting. There are many tasks to be performed and I will need volunteers from every county to gather signatures. I estimate we need about 520,000 signatures. My goal is to get 700,000.
If you can volunteer, time, web design, advertising, legal help, or any kind of general assistance, I would appreciate it. We need to put a stop to Quinn's proposals that will drive businesses and jobs out of the state and massively raise your taxes as part of the bargain.
Please email Recall Governor Pat Quinn Today (RecallQuinnToday@gmail.com) and lend your support to the effort to save the state of Illinois from Quinn's fiscal recklessness. Please let me know what you can do to help.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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