This week, Republican presidential frontrunner Newt Gingrich proposed reforming Social Security by giving young workers the option of staying out of the federal retirement program, and putting their share of the payroll tax into private investment accounts instead. Gingrich said his plan would give young people more control over their money, and lift the economy by funneling new investment into stocks and bonds, without affecting the benefits of people receiving Social Security checks now. Other Republicans, including George W. Bush, have tried and failed to pitch this kind of private account before. Would Gingrich's "radical" plan be any different?
Nope. It just won't work: No matter how good you think this sounds, economist Paul N. Van de Water tells The New York Times, it won't work the way Gingrich says, because "if younger workers withdrew from Social Security, there would be a huge gap in payments for current retirees." That's what doomed George W. Bush’s proposal for individual retirement accounts in 2005. "It's basically impossible" to start a private-account plan without "huge federal borrowing" or steep benefit cuts to make up the shortfall.
"A Gingrich alternative to Social Security"
Actually, Newt's onto something here: Gingrich's plan "would be a move in the right direction," says Jacob Sullum at Reason. His proposal is actually "more radical" than Bush's plan, "which would have let people invest only part of their payroll taxes" in private accounts. Although as Gingrich defends his privatization idea, he might regret having dismissed Rep. Paul Ryan's proposal to privatize Medicare as an example of "right-wing social engineering." It's hard to square that criticism with Newt's latest plan.
"Gingrich's righ-wing social engineering"
But does Newt really believe in privatization? If Gingrich really thinks privatization is the answer, says Pat Garofolo at ThinkProgress, why is he promising that the government will write young investors a check if their private accounts don't give them as much retirement money as Social Security would have? That would only encourage people to "make risky investments and hope for a big payoff." If Gingrich really wants people to control their money, he'd let them — not the government — deal with the consequences if they make bad choices.
"Gingrich's latest Social Security scheme: Privatize The program then bail out bad investors"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- How to be the most productive person in your office — and still get home by 5:30 p.m.
- 43 TV shows to watch in 2014
- Obama just kneecapped Jeb Bush and Chris Christie's 2016 prospects
- It's official: The religious right is calling it quits
- 10 classic Sesame Street moments we wouldn't show today's kids
- Alien conspiracy theorists think the government is on the verge of spilling big secrets
- 7 grammar rules you really should pay attention to
- How science is accelerating our search for alien life
- How to be charismatic, according to science
- The super-rich are just as miserable as the rest of us
Subscribe to the Week