Republicans have been getting a lot of flack for not bringing ideas to the table at a time when our nation desperately needs them. But the recent budget proposal by Republican House Budget maven Paul Ryan is a sharp rebuke to the notion that Republicans bring nothing to the table and an outright rejection of the notion that Republicans are so ruled by ideology that they cannot propose ideas outside their narrow scope.
Among its many plans, the Ryan budget proposal calls for nationalizing the Stock Market.
It is true that, in discussing the topic of the Republican plan for Social Security, the phrase generally used is “privatizing Social Security.” But consider what the plan actually proposes. Just as the last proposal under George W. Bush did, the plan allows taxpayers to reroute a portion of their FICA taxes to “personal savings accounts.” So far, it almost seems private, except for the fact that the government isn’t giving your money back to you and they’re not ceasing to remove FICA taxes from your paycheck: you’re still paying taxes.
It is a “personal savings account,” which means according to the plan that it will allow you to pass on your balance to your children. But what do you invest in? Well, according to the plan, you invest in “a series of funds managed by the U.S. government.” Ok, got that? You don’t invest the money yourself, it gets taken out of your paycheck. And you don’t get to pick the funds, the government does. It’s private. Remember that.
So how will the money be disbursed? Do you get to dip into it like your 401k? Well, the plan doesn’t make any mention of that, directly. But after mentioning that they also want to “modernize” the age of retirement (three guesses: would that be “modernizing” it up? Or down?), they do say:
The modernization of the retirement age will not affect the ability of an individual who chooses the personal account system to retire early, as long as his or her account has accumulated enough funds to provide an annuity equivalent to 150 percent of poverty.
For those of you whom, like me, are less familiar with such financial jargon, that would be defined as, “income from capital investment paid in a series of regular payments.” That means that the government isn’t giving you your money back or ceasing FICA payments; it’s only allowing you to invest in the funds that they’ve setup; and apparently, they decide when and how much of “your” money you get back. Sounds pretty private, huh?
So far, this doesn’t seem very private at all. It sounds like the federal government doing with your FICA money something not unlike what the states do with your money by investing it in funds. Except, of course, with the veneer of privacy. But here’s a question: how much money do you think gets invested into the Social Security trust fund every year? How much of the taxes that we pay goes directly into the trust fund – and how much would therefore be invested into the stock market under the Republican plan?
Would you believe $700 billion annually? It is difficult to find the answer to the question “how much new capital is invested in the stock market every year.” After all, which market? The Dow? The NASDAQ? And what constitutes “new” money? But consider this: if one entity comes into the game with three quarters of a trillion dollars to spend every single year – not a fluctuating number like private investment, a stable number from taxation – whom do you think calls the shots in that marketplace? How long before the U.S. government owns a controlling interest in the entire market?
I’m guessing not more than ten years. And Republicans, fiscal hawks that they are, must surely be aware of that. Especially since the plan contains this very interesting chestnut:
Guarantee of Contributions. Individuals who choose to invest in personal accounts will be ensured every dollar they place into an account will be guaranteed, even after inflation. With the recent market downturn, individuals must be assured their retirement is secure. By guaranteeing the dollars put into an account, individuals can be assured that a large-scale market downturn will not cost them their Social Security personal accounts.
Pray tell, who is paying for that? Well, clearly if the government is required to insure every dollar you’ve invested into the stock market, they’re going to need to do everything in their considerable power to prevent that market downturn from ever happening.