In the Washington Post, Senator Jeff Sessions proposes what he calls a PLUS Account, which is eerily similar to the USA Accounts President Clinton proposed. These are a taxpayer supported savings account in addition to Social Security.
Proposals such as these assume that because aggregate savings is low, lower and middle class Americans are not saving. More detailed studies show that this is not the case. Further, the national savings rates count only the book value of financial assets, not their market value. If you include both market value and the value of governmental pensions, there is quite a bit of savings going on.
The ugly fact of the matter is that this nation still pretty much owns the world, at least the richest families do. Saying that there is a savings crisis is as much of a sham as saying that Social Security is going broke based on the most pessimistic economic growth and demographic assumptions.
Social Security is not going broke in either the long or short terms - although either deficit financing or higher taxes on the wealthy will be required to redeem the Social Security Trust Fund. That is as it should be.
Both the PLUS Account and the prior USA Account proposals, as well as proposals to enact Personal Retirement Accounts for Social Security, rely on the inaccurate assumption that you can eat a stock certificate. The sad fact of the matter is that you cannot. You have to either have domestic workers or foreign workers who are willing to work for a profit making enterprise who give a portion of their labor value to pay the dividends of stock holders who then buy the products that these workers make. Sounds like a form of taxation to me.
If there is a problem for future retirees, it is that they had too few children to replace them, or could not afford to have more. They took too long to get their careers going to have the three or four kids necessary to offset those who have none. If it is impossible for the average family of four kids to get buy on one person's salary (and I am not averse to being a stay at home
Dad again), you are going to get a demographic problem.
Multi-national corporations are only a stop-gap, as is immigration. Eventually, overseas workers demand union representation and higher wages and immigrants buy in to the low-birth rate culture. The answer is not saving or creating financial capital, it is in creating human capital the old fashioned way - having babies. The reverse has to be true as well, not having babies should be penalized. The ugly truth is that people who decide not to have kids should pay a premium to those of us who change diapers, clean up puke and deal with the terrible twos and the even more terrible threes. Until we make that happen, there will be a problem with retirement income.
Of course, the demographic collapse does have its upside. Housing will eventually be quite a bit cheaper, at least for those who stay in some areas, as baby boomers die and leave property to their kids. Neither my daughter nor her cousin need to worry about buying a place to live, since when me and my siblings and our spouses die there will enough real estate to go around.
That is why you have to include housing values in savings. Today's teens and even the 20 somethings will have plenty of resources if you include the land they stand to inherit, or the land they can purchase if they move to areas which are becoming ghost towns. With the Internet and satellite TV, they don't need either stores or theaters to live quite comfortably anywhere, as long as someone is selling gas (that's a whole different issue).
Ignoring the problems with the savings assumptions, the Sessions proposal does have promise. It can be improved by adding a proviso that the individual could direct the investment in their account to their employer's stock and shift funds to that stock upon changing jobs. They should be able to vote that stock - or have their union do so. This would give the employee more of a say in the workplace and an incentive to perform. It would also give employers more of an incentive to contribute, since it could essentially buy back stock or transfer retained equity to stock to satisfy the match.
If such a scenario works out, it would provide support for personal retirement accounts in Social Security, which would gain a bigger and bigger share of the ownership of American enterprise until all that would be left are employee-controled firms or non-profits/government enterprise with PAYGO pensions (since CALPERS would have nothing to invest in with all firms becoming privately held).
