In March 1999, the Senate passed by 99-0 vote a resolution opposing any government-directed investment of Social Security funds. Unfortunately, these top two incumbent pols have opponents who trumpet another siren song for dummies, the Archer-Shaw proposal that privatizes profit and socializes risk in a manner reminiscent of the incentive structure that led to the savings and loan collapse which played out a decade ago. Looking at the plan offered by Republican Congressmen Bill Archer and Clay Shaw reveals major problems.
Government analyses acknowledge that social security tax must increase 40% to 80% to pay benefits promised to young workers, three-quarters of whom are smart enough to know this is not feasible. In surveys, they indicate no trust in the existing federal tax scheme, it being nothing more than veiled wealth redistribution. Most government reports also agree that (the sham of) public bond investment has historically provided a 2.3% return versus 7.5% return for private investment in stocks, a three to one ratio that has held steady over the past two centuries. Statistics show that equity returns have averaged 7% since 1802, and showed a high of 12.6% return over a best twenty year period in U.S. history. So the Archer-Shaw proposal is to deposit 2% of the 12.4% SS payroll tax in a worker owned account to achieve three-fold return improvements. So far so good - except for this wild and crazy thought: why not all into private investment? Okay, the 2% proposal is a start; but, the most significant feature of Archer-Shaw is the "100% clawback" requirement whereby worker assets are returned to government upon retirement. Defined benefits would be paid to the worker with the provision that, if PSSA acquired assets exceed those promised by Social Security, the worker can convert the account surplus to an annuity.