Sunday, June 14, 2009

Rise Up: Reclaiming the American Dream

The Question and Answer

Social Security was created in the 1930’s to help elderly Americans fund their retirement. But now we're left with this question – is the way they decided to fund it the best way to do it today? Social Security and Medicare are both technically bankrupt. With the pay-as-you-go method, there won't be enough working people to pay for the system. It's unsustainable.

Welcome to the Rise Up initiative; no new taxes, no cut benefits, no temporary fixes. Rise Up will maintain benefits for retirees, greatly increase retirement benefits for the future, slash taxes, put money back into everyone's hands for they and their children's futures, and eliminate the $58 trillion unfunded Social Security and Medicare liability.

This Plan Will...

• Generate the biggest tax cut in history
• Reduce the size of government by half
• Alleviate poverty and economically emancipate lower class citizens
• Infuse enormous sums directly into the economy and accelerate growth
• Eliminate the need for government pensions and Medicare
• Pay off all $58 trillion of unfunded Medicare liabilities
• Give back to Americans the money that they earn
• Increase the economic opportunities of all Americans

Why It Isn't Working

When Social Security and Medicare were originally set up, they were intended as retirement programs and never designed as safety nets. Contrary to popular belief, the programs are not a fund that you pay into as you work and draw on when you retire. It's pay-as-you-go, with taxes from those working paying for the benefits of those retired. When the system was first set up under FDR, the program was small enough and the number of people working large enough to fund it, but since that time both the coverage of the program and the percentage of people retiring have increased, making the burden heavier and now unsustainable. As of today, future benefits to be paid out will exceed anticipated payroll taxes by $58 trillion. That's a debt of $188,000 for every man, woman and child in America or over $500,000 for every household.

Unfortunately politicians haven't addressed the problem, preferring to kick the can down the street to future generations. In the next few years the anticipated benefits will outstrip what payroll taxes can fund, which means we either impose new taxes on workers or we reduce the benefits everyone receives at retirement. But there's another option: Rise Up will let us climb out of the hole we've dug ourselves into, substantially increase benefits and dramatically reduce taxes.

How This Works

Rise Up redirects the 15.3% payroll tax paid by individuals (and in the case of employees, their employers too) into a personally-owned investment account that will grow over their working life. The funds are invested in safe indexed stock funds that have historically been growing at over a 10% rate since 1911. It will not affect current checks for retirees - the enacting legislation guarantees zero reduction in benefits and those benefits will be backed by the government. In fact, those benefits may be increased over present levels. Seven important principles make Rise Up work:

I. Convenience: For those people who can’t manage their own money, contributing to the capital pool for investment is automatic.

II. Constancy: It won't cost the taxpayer one dime more than it does now – it will be the same 15% deducted for payroll taxes now paid for by the taxpayer and his employer or just the taxpayer if he is self-employed.

III. Security: The taxpayer’s funds are are unreachable by politicians, Congress, taxes, courts, or anyone else. No one, no entity, can invade the taxpayer’s personal account during his working life, giving it the opportunity and time to grow.

IV. Stability: As a minimum all present and future retirees without the time to accumulate their nest eggs are guaranteed to receive from the government the same present benefits paid under Social Security, Disability and Medicare for the rest of their lives.

V. Neutrality: The taxpayer’s funds will not be managed by stock brokers or investment houses; the trust will merely invest in already existing stock indexed funds directly bypassing the cost of Wall Street advice, management and tricks.

VI. Choice: The taxpayer will control which stock funds his or her money is invested in during their working life. These funds will track the steady upward movement of the market and grow with our economy.

VII. Safety: The funds will not be invested in risky stocks funds They will contain hundreds of quality stocks and avoid having one or two or even a group of them crash the whole account.

Balancing the Present and Future

Rise Up will direct Federal payroll taxes to be placed in the Personal Pension Investment accounts (PPA) of each particular taxpayer while also providing for the funding of all benefits of existing Social Security and Medicare beneficiaries. How is this done?

A dollar a year invested for 40 years compounds into $442 at a rate of 10% per year, whereas printing 40 dollars over 40 years generates only a $40 currency dilution, or $40 more dollars put into the total money supply, making each dollar worth less. The PPAs will grow over time to the point where in 40 years they will be 11 times greater than the actual currency dilution if all benefits had been paid for 40 years by printing money.

In the short term, the infusion of massive amounts of new capital into the stock market will substantially increase economic activity and double Federal income tax revenue within three to five years. This increase can be used to pay the benefits due under the old entitlement plans and reduce the need to use printed money.

There are also numerous other ways to fund the old entitlement benefits other than printing money or using taxes, such as privatizing public lands, buildings and other government facilities. As older participants pass out of the system, the old entitlement liabilities extinguish themselves. And depending on growth patterns, the PPA will be sufficient after 15 to 25 years to fund benefits equivalent to those guaranteed under the old plans, taking away the need for calculation of unfunded liabilities.

Our Economy

A free market relies on an ever-increasing pool of capital with which to grow and prosper. Unfortunately, punishing taxation, suffocating regulations and artificial "stimulus" packages funded by government debt, borrowing, and future taxes puts a drain that capital, stunting economic growth. The money infusion by PPAs represents the investment necessary to rapidly grow the economy.

PPAs, by investing in stocks, will add $100 billion a month to the economy, or $1.2 trillion a year, with no new taxes, government spending, or more borrowing to pay for that spending. That's $1.2 trillion a year of new investments, new businesses and new jobs. The multiplier factor will take that annual $1.2 trillion and create a least $6 trillion of new GDP and millions of new jobs, throwing the economy into over-drive. And every working person, from the richest to the poorest, will be able to put away money. But what will that look like?

Average Americans

In recent years the average American has not been saving but spending all their income just to stay afloat. With Rise Up, that all changes.

The average American household makes over $50,000 a year and pays over $7,500 in payroll taxes. In plain math, that $7,500 invested each year in the stock market, earning 10% a year over 40 years, will generate a $4 million nest egg that throws off a $33,000 a month retirement check without touching the trust, which can be passed on to his or her heirs. After 40 years, a janitor making $20,000 a year can expect $1.6 million, a technician making $40,000 can expect $3.2 million and a truck driver making $60,000 can expect $4.8 million. That's the real math. Compare that to current programs, with no nest egg at all and only a paltry monthly check. Rise Up takes money out of the hands of government, so that hard-working Americans can fully realize the American Dream.

Rise Up America

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