>>>>There is a valid concern, voiced quite well by Chairman Alan Greenspan, that private accounts, if established from funds in the Trust Fund, would basically be trading the Government Bonds currently held for equities, and therefore would be a zero sum game, in the total retirement arena. That makes sense. However, if the contribution for personal accounts came out before the employer mailed the check to the federal government, assuming that such a system could be protected and regulated for retirement, then it would be one dollar paying for one dollar's worth of stock, and that particular problem would be taken care of.
Jeremy
This is a problem many others have pointed out. To the extent that a SS reform plan uses the idea of 'increased savings', they really require NEW money be saved. Since the excess FICA receipts are being ' saved' already, moving them around doesn't help. For every one of those dollars that is not used to soak up Federal deficits, the gov't will pull another dollar from the capital markets to do so. Same thing with the process of 'buying up public debt' (i.e. any dollar not used to do so, will fail to 'free' a dollar). No matter where in the process you 'grab' the dollar, it makes no difference in a comparison to the current system. It is a zero-sum proposal.
Peterson (of Concord Coalition) makes exactly this point. His proposal requires workers to save money on top of their FICA taxes, although there is 'means testing' of benefits and other 'savings' involved. The new savings in the USA accounts (Clinton) is in the 'locking' up of future 'surpluses', which might otherwise go to govt spending or be refunded to taxpayers, some of whom would spend the money. With the CATO plan, the additional savings come from unspecified govt spending cuts. You have to decrease 'consumption' somewhere to get the 'overnight' increase in savings. Just moving money from bonds to stocks only helps if the stocks yield more, and then only for that specific account, not the nation as a whole.
Your 'solution' really doesn't address the problem. It is still the 'same dollar' that would have gone elsewhere in the capital markets. It has to be an additional dollar to increase national savings.
