Modify Social Security so that Americans invest in America

Today I received my Social Security Statement. My employer and I each pay into Social Secuirty taxes 6.2% of my salary, up to an annual limit of $106,800, an amount which increases each year. In 2008, these taxes collected about $800 billion.

Compare this number to the $500 billion worth of U.S. Treasury debt purchased by foreign countries from October 2008 - October 2009, and you see that we "save" about as much for our elderly as we borrow from other countries.

I propose a modification to restore Social Security as insurance, rather than entitlement.

1. Set Social Security Taxes at 12% (6% each from employee and employer) up to $120,000 annual income, but do not adjust the income limit each year.
2. Add a 4% deduction (2% each from employee and employer) onto annual income above $120,000, which goes into a Personal Retirement Account (PRA), which exists in the name of the employee and invests automatically into 10-year inflation-indexed U.S. Treasury bonds
3. Upon death, disability, or retirement, the PRA money can be withdrawn (at a limited rate) by the account owner to use for living expenses
4. Once the PRA account is depleted, Social Security kicks in, if needed (Note that the longer you wait to receive Social Security, the higher your monthly payment is.)
5. If the account holder dies with a PRA balance, that money passes to heirs

If you are fortunate enough to not need Social Security Insurance then good for you, but when you do need it your payout will be higher since you waited longer to start collecting.

By not raising the Social Security income limit, over decades more Americans will transition into PRA levels due to inflation and wage growth. Gradually, we will modify ourselves into a nation of self-supporting savers who have insurance against calamities, rather than an entitled population of older retirees paid by younger workers.

By placing all PRA funds into Treasury bills, we eliminate market risk, remove the inevitable lobbying establishment that would flock to PRA funds invested in private securities, and establish a large, reliable source of buyers for U.S. Government debt. While government debt in general should be avoided over the long term, when we need it we should have American debtors. That way Americans are funding the government's debt programs, rather than relying on foreign investors who may dump our debt or use it as leverage against us in international politics.

The details of this plan will need thorough analysis, in order to validate that it accomplishes the goals of (1) gradual change toward a more financially sustainable future (2) solvency for the existing social security insurance program (3) establishment of a solid personal retirement savings program, and (4) reduction of our reliance on foreign-owned government debt.

Honor top tax-payers at Presidential dinners

All Presidents hold many domestic events where the typical audience consists of top party donors, wealthy executives, powerful lobbyists, celebrities, leading politicians, media contacts, and so forth. If America were a business, this would be like the CEO hosting dinners for bankers, executives, and friends - but never inviting the top customers or salespeople.

America's finances are like a business - we bring money in to pay for the government, which then tries to invest in the common good in ways that no individual or private organization could. So why not have presidential dinners with the Americans who are most helping our nation's business of governance? I'm thinking of audiences with:

• Citizens who paid the most personal income tax last year
• Executives from the top ten corporate taxpayers
• Federal agency heads whose departments accomplished their goals and came in the most under budget
• Federal contractors who completed their projects the most under budget (and returned the money to the treasury)
• Whistle-blowers who exposed the ten largest amounts fraud and waste
• Representatives whose districts had the fewest earmarks or highest ratio of taxes paid to federal funds accepted

In other words, give access to Presidential influence through paying taxes and improving government performance, rather than raising thousands or millions for one candidate or party.

Mayor Bloomberg should have let voters give away $100 million for his campaign

Congratulations to New York City Mayor Michael Bloomberg, who won his third term as mayor, after spending close to $100 million on the campaign.

This was his money; he earned it, and in America you choose how to spend your money. As a practical matter, however, I think that Mayor Bloomberg could have accomplished his reelection goal while donating most of that money to improving the lives of New York's least fortunate citizens.

Here's how: First, set aside maybe $10 million for traditional campaign expenses - an office, staff, public appearances, press interviews, and a solid Web site infrastructure. Then, put $90 million into a pool that will be donated to New York City charities over the 10 weeks leading up to the election. Each week, voters go to Mayor Bloomberg's campaign web site, register in his database (with appropriate precautions to confirm the person is an individual voter), and then select from a list of local charities who they would like to receive a $1 donation from the Bloomberg campaign. Each Saturday night, the selections are tallied and checks are presented to the charities in a nice public appearance (covered in the Sunday papers, of course). The next week, the donation amount may grow (or shrink) depending on how many voters directed contributions.

Instead of political activitists calling you during dinner to support their candidate, the PTA and local Boys & Girls Club would be hanging out at the grocery store, asking you to visit the Bloomberg campaign site and help them raise money for a new computer or trip to the Capitol. By the end of the campaign New York City schools and charities would be $90 million richer, Mayor Bloomberg might have a nice tax deduction, and the publicity and goodwill from this campaign would far outstretch anything his mailers, robo-calls, radio and TV ads could have done.

Government that works for America, must first work for Americans

I am glad for Laura Ling, Euna Lee, and their families that North Korea released them after President Bill Clinton's visit this week. Media analysts have a field day with subtle acts of international diplomacy such as this, looking for the hidden meanings and trying to sort out winners and losers. But there are very few cases where the best interest of a few individual Americans should be sacrificed for the "greater good" of America, and this certainly was not one of them. Lost in the current context of big government plans, such as "reforming Health Care" and "Creating Jobs", is the fact that the first job of the American government is to serve individual American citizens - and this is surely an example of that happening.

If you get to thinkin' you're a person of some influence, try orderin' somebody else's dog around.

(Most of this post is taken verbatim from Vicki Haddock’s article "Above the Influence", California Magazine, May/June 2009, p. 41-43, based on research from Berkeley psychology Professor Dacher Keltner, Cameron Anderson (Haas Business School), and graduate student Gavin Kilduff.)

Power flows to self-confident people who speak up – even if they don’t know what they are talking about and are often wrong. Power tends to erode empathy, and to cause the one in power to look upon themselves as the center of the universe. When people go on a power trip, they typically are encouraged by fawners and flatterers. Small wonder that the powerful come and go, yet year after year the rest of America looks at the those in Washington and on Wall Street and asks, “What were they thinking?!?”

Power doesn’t corrupt, however, as much as it reveals the true character. Those who already were community-oriented (“I look out for others”) or exchange-oriented (“I give something in the expectation of something equal in return”) tend to become more generous in power, while those who are innately self-centered become more selfish. Abraham Lincoln observed, “Nearly all men can stand adversity. If you want to test a man’s character, give him power.”

My advice to those in power: take out the trash twice a week.

The Vice President should perform Party duties for the President

The President should serve the entire nation from a position above normal party politics; so, he or she should refrain from performing Party duties, such as fund-raising, campaign rallies, and party-only speeches and meetings. The party in power will of course resist this, as the Presidency is too big a pulpit to resist using for partisan advantage. The Vice President, however, could perform these duties as the President’s representative, while keeping the President away from the partisanship inherent in party functions. Of course, this would take tremendous personal integrity from the President to resist party calls for favoritism.

To this American, something does not seem right watching any President raise money for other members of their party.

GM failed because its liabilities were based on negotiation, not productivity. Americans should learn a lesson.

I recently bought a new 2009 Buick Enclave and know that GM makes world-class cars. The bumper-to-bumper 5-year service warranty and On Star remote diagnostics show that they also know how to innovate and run a service business. Nevertheless, today GM filed for bankruptcy, while Ford and Toyota continue as independent car manufacturers.

General Motors was a phenomenal business that produced huge profits and benefits during its Alfred Sloan era. But eventually, the stakeholders (executives, unionized employees, dealers, politicians) placed liabilities on GM that paid out based on the results of negotiations, not productivity or business conditions. Thousands of dealerships built when GM had a 50% market share were unnecessary today, but state laws and inflexible regulations prevented their closure. Lifetime benefits and pensions negotiated when GM was young and growing cannot be sustained when it is older and shrinking.

Over the years, I’m sure that union leaders were congratulated for extracting “guaranteed” wages, executives got big bonuses for making promises that prevented a strike in exchange for liabilities pushed out far past their retirement, and politicians were re-elected for protecting their patrons. But any “guarantee” that is not based on productivity and a sound business model (that includes a reasonable profit and return on capital) is doomed to fail.

Americans should learn a lesson from General Motors. Our politicians make “guarantees” that lead to applause, re-election, and a comfortable consulting retirement. But these liabilities will not be sustained unless they are connected to productivity and a sustainable way of life, one that ensures our great-grandchildren will have the same blessings that we have.

P.S. GM is still a great company, but a horrible business.

Nothing is Too Big To Fail

Bloomberg reports that Nancy Pelosi “says GM is too big to fail”. Americans need to remember that nothing is too big to fail – including the United States of America. The responsibility to prevent failure is ours – to share the blessings of liberty among all instead of everyone accumulating as much as possible for themselves and then getting out before it all falls down.

Failure is not guaranteed when something is "too big" - it happens when the system is too complex or inflexible to adapt to external changes.