7.65% Solution (Social Security)
- 7.65% Solution (Social Security)
The 7.65% Solution is a policy proposal from the American Institute for Full Employment, advocating personal retirement accounts and tax changes to address the long-term solvency of U.S. Social Security.
How It Works
Unlike other reform plans, the 7.65% Solution invests the employee’s Social Security tax (6.2%) and Medicare tax (1.45%), permanently eliminating the entire FICA tax and replacing it with a compulsory savings. The 7.65% solution creates a real Social Security Trust Fund that first borrows, then pays off the debt, then invests in American corporate bonds. As the solution begins to take hold in the economy, the resulting growth in receipts is infused in the real Social Security Trust fund, reducing the need for borrowing. When the investment income of the trust fund is large enough to cover expected outlays from Social Security the employer portion of the FICA tax is eliminated causing additional benefit to the economy. As the real trust fund grows its investment income is used to eventually pay down the national debt.
As the traditional system progresses toward the 7.65% solution, the unfunded liabilities of both Social Security and Medicare are completely eliminated. The 7.65% solution creates a for each worker that is much greater than our current Social Security system can deliver. This is accomplished through a system of saving and investment that compounds the income, dividends and interest earned on those investments over many working years before being utilized for retirement and health purposes.
Proponents and promotion
Members of FreedomWorks have distributed brochures about the 7.65% Solution at local speaking events (FreedomWorks 2006a) and have contributed to a promotional video (FreedomWorks 2006b).
References
* [http://www.fullemployment.org/book765solution.pdf Building a Nest Egg for You and Your Grandchildren: The 7.65% Solution] (American Institute for Full Employment 2004)
* [http://www.fullemployment.org/ American Institute for Full Employment]
* [http://www.sourcewatch.org/index.php?title=American_Institute_for_Full_Employment American Institute for Full Employment] - article at SourceWatch
* [http://www.americaislistening.org/ America Is Listening] - web site dedicated to the promotion of the 7.65% Solution
ee also
* Social_Security_%28United_States%29
* Social Security debate (United States)
Wikimedia Foundation.
2010.
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