Currently, employees and employers pay into the Social Security system through the payroll tax. Under Gingrich’s proposal, the employer-funded portion would go toward keeping the current Social Security system sustainable. But part of the employee-funded portion could be invested in a personal savings account. People would be given the option of putting money into a range of investments administered by private companies, similar to a 401-k plan. The person would own his account, which would be passed on to his estate when the person dies.The plan can be found on Newt.org here.
Gingrich said in addition to giving people more ownership over their retirement benefits, it would help the economy by spurring investment through the private savings accounts. “The amount of savings builds up rapidly and creates a level of capital which accelerates economic growth,” Gingrich said.
Gingrich adviser Peter Ferrara, a conservative lawyer who served in the administrations of President Reagan and President George H.W. Bush, said Gingrich has not yet determined what portion of a person’s payroll tax they could contribute, or for what ages the program would be phased in. But Gingrich said current beneficiaries would not be impacted.
To pay for the transition period, Gingrich would take 185 federal programs that help the poor and give the money – including Medicaid money - as block grants to the states. Gingrich said that would eliminate federal bureaucracy and let states come up with training programs to get people off social programs. “We want to challenge the states not to figure out how you can take this federal block grant to subsidize the poor being poor, we want them to take this amount and use it to figure out how you can help the poor learn to be non-poor,” Gingrich said.
In a report posted on Gingrich’s website, Ferrara estimated that switching to block grants could save the federal government $3.25 trillion over 10 years and the states $1.4 trillion.
Monday, November 21, 2011
Newt calls for Personal Retirement Accounts in New Hampshire
Boston.com writes of the plan, which would be voluntary: