Speaking of the 2% being invested till 2075 (In fact, in this example, it would assuredly do the job of funding the entirety of that 19%.)
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I disagree with your assertion saving 2% every year till 2075 would eliminate the required revenues or taxation at a rate of 19%. The most you can replace of ones wages at retirement adjusted for inflation, in a private account, which upon death, is not left to social security, but to heirs, is 49.2%. This means OASI still needs funding for the remaining 50.8%. It may not be the full 19%, but it is not zero either. However, if 2% is directly proportional to 49.2% at equilibrium (>40 years work) then we can assume that this 2% would replace 49.2% of the 19% projected tax burden in 2075. This still leaves us with 9.65% OASI tax to pay 100% of projected benefits (49.2% from private account and 50.8% of the current projected OASI benefit).
However, there is a little problem. We do not have 40 years of surpluses for private accounts to mature to full potential. If we allow workers to transfer 2% of their subjected wages to private accounts, then OASI will go cash negative in the same year by about $40 billion (does not count the credited interest). By 2020 the entire OASI fund will be exhausted. Take a look at this analysis on phased in projected benefit cut based on a 2% private account.
What most of these plans do, is draw from general revenues to pay the 2%. Boy that sounds just like the 70's, 80's and early 90's. My taxes (FICA) are too high. Congress then passes legislation to allow IRA's, 401-K's, earned income credits, child care exemptions, $500 per child tax credit, etc. all in the name of reducing taxes on the working person. The problem is Congress is cutting the wrong tax or giving credits for the wrong thing. FICA taxes are too high! Cutting the taxes which support our government and other services does nothing to solve the problem. In fact it makes it worse by running deficits.
The largest benefit cut, if it were fair, would be 11.9% to those retiring in 2020. But then, none of theses plans are fair are they? Everyone of the proposed plans requires no sacrifices from current retirees. If things were or had been fair, here are the OASI tax rates that should have been paid for those born between 1917 and 1932.
But the word "fair" for the past 30 years when it came to fix Social Security only meant passing the buck onto the next generation or in this case passing the "bill."
