Pulling Back from the Entitlement Cliff
Andrew Biggs reviews the reckless state of our national entitlement, with this bit pointing toward something that I’ve been thinking might be the wisest approach, financially and socially:
Meanwhile, New Zealand offers a flat universal benefit to all retirees, with voluntary “Kiwi Saver” retirement accounts providing additional income. Such a setup would be a significant change from our current system, but would allow us to give the household of every retired and disabled worker a poverty-level benefit with a payroll tax of under 6 percent. A reform that effectively eliminated poverty for retirees and generated income above the poverty level by means of individual savings would be good policy, and might even be good politics.
As I’ve suggested before, with respect to healthcare, every American should have some sort of account with some very limited rules, into which they and others could contribute toward healthcare and retirement. If it helps for the government to issue the account with a person’s Social Security number, then that’d be fine, but government involvement would pretty much end there. Over a person’s life, he or she could contribute money from payroll, tax free, the government could provide whatever minimum benefit we all decide is appropriate, and employers, charities, family members, whoever, could add money, as well. The accounts could be partitioned — part for healthcare and part for retirement — or that could be left up to the owner.
The most important part of the switch would be that the person would pay directly for healthcare services and save directly for his or her own retirement. And, unlike current entitlements, upon the person’s death the remainder would be inheritable, giving lower-income families assets with which they could improve their lot over time.