I think you missed the boat on this. First you do not need to replace OASI revenues with dividend revenues. Why simply put most of the OASI revenue is not actaully spend by those getting it. It is saved. Ues many people spend it and need it for day to day activities. However, a need based plan would be much like deciding between eating at home and eating out. Can I afford it. Many people see OASI as simply extra money. If they had to physically take it out of the bank and then spend it, they probably would make different choices. Do I keep this car or buy another. Etc.
The other flaw is as workers who would be saving, they would be willing to buy into the company where as those who are retired would be willing to sell poritons in order to live. The economy would find an equilibrium. In other ownership would transfer during ones life time instead of at death.
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Total privatization works only if one is willing to have
private accounts soak up nearly all of the stocks on the U.S. stockmarket.
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What is wrong with that? We are a capitalsitic society. Who do you want to own it. Somebody has too.
Furthermore, there is no way for Social Security to pay full benefits in the future. Therefore, comparing an impossibility with something else is a mute point. The money in the trust fund is an obligation to tax the american people.
Raising the base does little good if you really look at it. For example we know OASI took in $349.946 billion in OASI taxes in 1997. Using a tax rate of 10.4% we find $3.365 Trillion in wages taxed. We also know from Social Security that they target around 82% of all wages to taxation. This means at most there is 18% additional money out there or about $605 Billion. subjecting this to 10.4% in 1997 would have raised an additional ~$63 billion more. Here is the problem. First you will loose about 35% to higher benefits which should be set aside now. Second, an undfunded liability of $10 Trillion creates a demand of $700 Billion more each year. Therefore, subjecting all wage income to OASI taxation gets you about 5-6% of what you need to just keep the unfunded liablity from increasing each year.
Let's look at the Social Security Lottery. Let's make it really simple. Inflation has been eradicated and is zero until the year 2050. Based on a 2% wage growth, I will pay $303,607 into Social Security. What do I get for this bet (contribution)? I get to play the Social Security Lottery. Social Security in exchange for my $303,607 allows me to bet I will live long enough to collect a $2,419 monthly benefit for life starting at age 70!! But that's not all! I may be eligible for Medicare! Doesn't this sound exciting?
Now I must warn you there is a catch to this fantastic sounding payout! You may not live long enough to collect a penny! That's right, living to age 70 is very tough for a large percentage of the population. The probability of living to age 70 is only 62%. This means 38% of us will play the game and not collect a penny, slightly better than a 50-50 chance, flip a coin. Their contributions go to the lucky winners over age 70.
