#6: Create a state retirement plan with private accounts
Social Security reform is desperately needed, but because it's the "third rail" of American politics, no national-level official wants to touch it. No one is likely to show the real guts necessary to deal with the problem until a crisis is inevitable.
Reform probably won't happen on the Federal level, since there's too much risk involved for any individual politician with very little reward.
But the states are the "laboratories of democracy," and it's within our reach to take up an experiment in private accounts in Iowa.
IPERS has been very rewarding for public employees
Let's follow the model by expanding it
We already have an aging population, which will dramatically increase our public liabilities over the long term
Iowa can become a laboratory for Social Security reform, showing how private accounts don't have to be implicit subsidies for the Fortune 500. By experimenting at the state level, we can demonstrate how investment flexibility can make for better pension funding without unfairly enriching the already-rich.
Prove the value of compound interest.
Also valuable as a work incentive. The state could match contributions for some low-income workers.
It's unpleasant that government should even be involved in retirement security in the first place, but that ship has long ago sailed. Unfortunately, retirment savings is a form of delayed gratification and we humans don't seem to be wired at doing that for the forty or more years most people will spend working.
So if we're going to end up footing the bill for retirement anyway, it's best if we conduct that transfer from ourselves to our future selves, rather than from grandchildren to grandparents. The point of a state system should be to demonstrate that a private-account system can work and that the Federal model (balancing state and national powers, as prescribed by the Constitution) can work to fix Social Security.
Reform probably won't happen on the Federal level, since there's too much risk involved for any individual politician with very little reward.
But the states are the "laboratories of democracy," and it's within our reach to take up an experiment in private accounts in Iowa.
IPERS has been very rewarding for public employees
Let's follow the model by expanding it
We already have an aging population, which will dramatically increase our public liabilities over the long term
Iowa can become a laboratory for Social Security reform, showing how private accounts don't have to be implicit subsidies for the Fortune 500. By experimenting at the state level, we can demonstrate how investment flexibility can make for better pension funding without unfairly enriching the already-rich.
Prove the value of compound interest.
Also valuable as a work incentive. The state could match contributions for some low-income workers.
It's unpleasant that government should even be involved in retirement security in the first place, but that ship has long ago sailed. Unfortunately, retirment savings is a form of delayed gratification and we humans don't seem to be wired at doing that for the forty or more years most people will spend working.
So if we're going to end up footing the bill for retirement anyway, it's best if we conduct that transfer from ourselves to our future selves, rather than from grandchildren to grandparents. The point of a state system should be to demonstrate that a private-account system can work and that the Federal model (balancing state and national powers, as prescribed by the Constitution) can work to fix Social Security.
- What government should do:
- What individuals should do:
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