Newt Gingrich's 'radical' plan to privatize Social Security

The GOP frontrunner suggests letting young Americans opt out of Social Security, investing instead in private retirement accounts. Would that work?

In a plan reminiscent of George W. Bush's failed 2005 effort, Newt Gingrich wants to let young Americans opt out of Social Security, and invest in private retirement accounts instead.
(Image credit: REUTERS/Adam Hunger)

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.

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