| www.cesj.org |
Comparing Capital Homesteading with
|
||||
|
THE AUTHORS |
Peter A. Diamond and Peter R. Orszag, Democratic economists |
Robert Pozen, investment executive; served on Pres. Bush’s Social Security Commission | President Bush | Norman G. Kurland, President, Center for Economic and Social Justice; former Deputy Chairman., President Reagan’s Task Force on Project Economic Justice |
| THE PLANS | Cut Benefits, Raise Taxes | Small Private Accounts With Progressive Indexing | Bush Plan | Capital Homesteading for Every Citizen |
| Includes private accounts | No | Yes—up to 2 percentage points of payroll tax. | Yes—up to 4 percentage points of payroll tax. | Yes—newly issued shares for growth financed by Fed-monetized credit through Capital Homestead Accounts (CHAs) |
| Raises taxes | Yes—lifts cap to 87% of wages subject to payroll tax (about $105,000 now) plus 3% tax on all earnings above cap. Increases payroll tax to 12.7% in 2025, 13.7% in 2020 and 14.2% in 2055. | No | Possibly—Bush willing to consider lifting wage cap. | No—eliminates payroll tax and substitutes a flat tax on all consumption incomes above the poverty level to cover Social Security and Medicare promises. |
| Cuts benefits | Yes—by average of 0.6% for workers currently 45; 4.5% for 35-year-olds; 8.6% for 25-year-olds. Low-wage workers’ benefits would rise; affluent workers’ would be cut. | Yes—most cuts aimed at affluent workers; low-income workers would not get cuts. | Possibly—Bush willing to consider raising retirement age or linking initial benefits to inflation rates rather than wage increases. | No—plan would guarantee that benefits would be no less than currently proposed. |
| New government borrowing | No | Yes | Yes | No—plan would shift from government deficit borrowings to private sector borrowings for financing broadly owned growth and dividend incomes. |
| Details | All new state and local government employees participate in system. Retirement age would rise with changes in life expectancy. | Upper-income beneficiaries would have initial benefit set according to inflation rates. Middle-income workers would mix inflation index and wage index. Poorer workers would remain in wage-indexed system. | Beginning in 2009, workers could divert 4% of their wages subject to Social Security taxation into private accounts. Promised benefits would be reduced by an amount equal to the account deposits, plus 3%. | Would finance Social Security and Medicare benefits from appropriated funds derived from general tax revenues. Through local banks, every citizen would receive annually $3,000 of Fed-generated credit to invest in new capital formation, with each loan repayable using pre-tax dividends (future savings) over an average of nine years |
| Goal | Maintain current system structure while enhancing benefits for vulnerable workers. | Balances political interests of both parties while minimizing borrowing. | Introduce robust private accounts while maintaining some social safety net. | (1) Accelerate non-inflationary private sector growth. (2) Reduce the pressure for redistributive taxation. (3) Generate a tax-sheltered accumulation, from birth through age 65, of an estimated $200,000 of wealth-producing assets capable of earning annually $30,000 of taxable dividend income, plus dividends of $750,000 distributed during a 65-year period. |
| Solvency date | In perpetuity | In perpetuity | Unknown | Immediate and continuing |
|
SOURCE: Revised from The Washington Post, February 24, 2005 For more details, see Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security (available at www.cesj.org) |
||||
| Summary of the Capital Homestead Act | Capital Homesteading Accountability and Safeguards | Saving the Social Security System -Norman Kurland |
The Case for a Capital Homestead Act for America | Capital Homesteading: A Plan for Jobs, Income and Capital Ownership |
|
|
|||||||||
|
P.O. Box 40711, Washington, D.C. 20016 - Phone: 703-243-5155, Fax: 703-243-5935 thirdway@cesj.org (e-mail) |
|||||||||
|
|||||||||
