The dirty little secret about the whole Social Security debate

Those in favor of Private Social Security accounts will talk about
creating an Onwership Society and how these accounts will belong to the individual and can be passed on.

The dirty secret? These accounts are not really under your control! No one is proposing letting you buy any stocks you like, any mutual fund you like, any limited partnership you like.

You know why? Because individual, by and large, make really crappy decision about their investments.

I know several very bright people, with Masters degrees in difficult subjects, who completely understand compounding interest, who have had troubles with credit card debt.

I have friends who think nothing of asking advice about an expensive transaction from people who have a financial interest in the decision.

That is the reality. People do dumb things. They have terrible impulse control. They don't spend the time on the tasks that will really advance their interests because the task is boring. They think people who are nice to them will actually have their interests at heart.

So, remind me again why I would want to get rid of a perfectly good insurance program?

How I would fix Social Security

Our local paper (Austin American-Statesman, a Cox News affiliate) ran an article Sunday covering various ways one might reform Social Security.

If we lift the salary cap (currently $90,000) then we have covered the short-fall with a bit left over. Talk about your crisis. :-)

So, what would I do?

1. Float the salary cap so that it covers 90% of Bill Gates', Michael Dell's, and Warren Buffet's salary for 2003 and then index it for inflation.
   
2. Float the retirement age so it is never less than 25% of median life expectancy.
   
3. Means test. Social Security should be Insurance, not Vacations for those who did well. Now, if you live longer than you expected and your investments run low, you can expect SS payments to go up (but not as high as if you did not do well; don't want to reward those who burn through their retirement savings foolishly).
   
4. Slowly convert 50% of the Treasury Bonds held by Social Security into investments in a Stock Index Fund which only includes companies chartered in the US. If it is good enough for California Teachers, it is good enough for all of us.
   
5. Slowly convert another 20% of any Social Security surplus into a fund which buys stocks in US companies which meet specific criteria:
   
   
   
   1. Max salary for any employee is no more than 50 x median salary and no more than 100 x minimum salary (exclude trainees (no one can be a trainee for more than 6 months))
      
   2. No more than one EPA fine per any two years
      
   3. Must win OSHA Star awards at least once in each 5 years
      
   
   (it is our damn money, we might as well use the leverage to make our county better)