Social Security and the FairTax
By Harrison Rose
My fellow Americans. America's economy is in decline. Social Security has run its course; its burden on government funding has grown massive. Private saving is the lowest its ever been, and, as the government deficit increases, foreign investments increase, nurturing the ever growing trade deficit. I, as President of the United States of America, propose a set of radically different changes to the tax policy and Social Security to save us, the American people, from catastrophe. The FairTax and the privatization of Social Security will keep our government and economy strong for centuries to come.
Three-score and thirteen years ago Social Security's fathers brought forth on this continent a new social insurance program, conceived in Liberalism, and dedicated to the proposition that all men, over the age of sixty-five, should be guaranteed retirement. But now, in two score and four years, this nation's government budget end is imminent. So, now we are engaged in a great election, testing whether that nation, or any nation, and its budget, so conceived and so dedicated, can long endure. I propose that this nation, under God, shall have a new birth of tax policy -- and that government of the people, by the people, for the people, shall not perish from the earth.
Economic principles dictate that investment is a product of three factors: private savings, government surplus, and foreign imports
Two of these are good for the economy, one is bad. Two of these are in decay, one is growing splendidly. Can you guess what's what? You guessed it. Private savings have dropped and are dropping magnificently: $187 billion in 2004 to $38 billion by the end of 2006. Government surplus is nonexistent and dropping further. And the trade deficit is $765 billion and rising. This is the state of our investment in current times.
If we wish to maintain a high standard of living, we must keep well paying jobs and investment. If we want to keep well paying jobs, we need balanced trade. If we must balance trade, which will remove a source of capital, the other two sources of capital must increase to offset: personal savings, and government surplus. Therefore, we must decrease the inflow of foreign capital, increase personal savings, and increase the government surplus. Now that we have goals, we need a plan of action.
The FairTax takes care of personal savings and the trade deficit. As the FairTax is a tax on consumption, it follows that people would consume less, and what people don't consume, they save. This huge boost in saving would contribute to fund America's investment needs. Problem solved. Also, the FairTax places US companies on the same playing field as foreign companies as they would not be burdened by corporation taxes, payroll taxes, capital gain taxes, etc. Foreign goods, which are untaxed under the current code, would be now be taxed at the same rate as US produced goods. American goods prices would drop significantly, while the price of foreign goods would rise, increasing the demand and, therefore, exports of US goods worldwide.
Finally, once personal savings are up and trade is balanced, the final factor, government surplus must be increased. There are two ways to do this: either increase taxes, or decrease government spending. No one wants higher taxes. Period. As mentioned above, Social Security is on a crash course, set for around 2050. Though Social Security had good motives in its creation, now that the baby boomers have found their way to the dough and the government consumed the funds rather than invested them, its toll on government income is enormous. By the year 2052, either the government will have to increase taxes or reduce expenditures to cover the cost. I propose that we completely privatize Social Security; none of this quasi-government stuff, just pure, market decided interest rates. Set a date (i.e. January 1, 2010) that is the cut off for Social Security eligibility: No one born after this date gets Social Security, but everyone beforehand does. Young people could choose to opt out of receiving SS, but still help finance the transition. Also, the FairTax would give a $2.5 trillion boost to the economy and remove the $300 billion annual IRS funds, which could finance the entire transition itself. Eventually, as the number of people eligible to receive SS declines, the government and the people will be completely weaned off of it and people will keep their money where it really counts, private saving (401(k)s, IRAs, etc.), and keep the government deficit to a minimum.
Harrison Rose is a 17-year old high school student in Greenville, South Carolina.
Get weekly updates about new issues of ESR!