Sec. #4: 40 Points, 31 on Combining Social Security with the AIWA System ...
Make Every Employed/Self-Employed/Home Managing American a Wealth Holding Investor with What Had Been Social Security "Retirement" Taxes.
One of the justifiable concerns of younger Americans is Social Security "retirement." Many young Americans (roughly, meaning under 50 years-old) expect to never see a dime of all the money they have, and will, be paying into the system during their working careers.
Sadly, if present trends continue, that's exactly what will happen. However, there is hope.
There is a crying need to institute a “universal” personal wealth creation system for all employed/self-employed/home-managing Americans. National wealth and economic growth will need to be increased, and remain high, as well.
Miss Star Parker, President of the Center for Urban Renewal and Education (CURE), discusses Social Security “retirement” weaknesses, starting on pg. 205 of the hardback copy of her excellent book, UNCLE SAM’S PLANTATION. (Pgs. 233/36 in the paperback edition).
On May 1, 1981, the country of Chile in South America implemented a personal wealth creation plan. That plan, in English called the Pension Savings Account (PSA) system, has been so successful that 30 other countries around the world have implement similar systems. Chile's system is going great guns today in 2019.
A PSA system is a "privatized" Social Security retirement that America very much needs. The "Americanized" version of the Chilean PSA is part of a three-part tax change package. The Americanized PSA dovetails well with Miss Parker’s comments. Full discussion of the other two proposals are in other chapters of this CST website, however, points 31 – 40 at the end of this writing give some basics on the other two proposals.
The American privatized Social Security can stand on its own, without the other two. However, the addition of the other two will only enhance the benefits of the American PSA. More on this in the future.
(The following was developed by J C Malinski, email@example.com).
- The full name of the USA's privatized Social Security retirement system is the AMERICAN FREEDOM INVESTMENT FUND/SOCIAL SECURITY PLUS (the AFIF/SSP).
- Each participating individual will have an AMERICAN INDEPENDENT WEALTH ACCOUNT (AIWA) within the AFIF/SSP. Every dime in the AIWAs will come from what is now (2018/9) the Social Security “retirement” taxes withheld from paychecks, “matched” by employers, and/or fully paid by the self-employed. Special funding provisions, if needed, will be created for the Home Management Services feature (explained in points 23 - 27 below). After the end of what will be a short “phase-in period” to the new system, all future money being paid in by/for Americans will be their 100%-owned property from day one. (Please see point 4).
- The 6.2% of compensation withheld from paychecks, and the 6.2% "match" employers pay under the current Social Security law for each individual employee, will go into the AIWA of each individua. Self-employed individuals will have the full 12.4% they pay go into their AIWAs. Changes will be made to the source of money for funding the match portion. Please see point 22 below.
- This 6.2%/12.4% money is allegedly in a "Trust Fund" being carefully managed to pay future "benefits" in retirement years. Nothing could be further from the truth. Legally this money is a TAX, hence, fully-owned by Uncle Sam. Two Supreme Court decisions, Helvering v. Davis (1937) and Fleming v. Nestor (1960) confirm this tax status. Under the AFIF/SSP, the money will 100% belong to the contributor/employees/home managers, after a possible 5- to 10-year phase-in period. (Points 2 and 28).
- Presently (going back to 1935) in terms of U S Government operations, this TAX money is transferred to "the Feds" for whatever they want, or wanted, to do with it.
- The Trust Fund is expected to run out of money in 2034/35. (This expected date has been reported from various sources and is known to the Trustees of the Social Security system. It's estimated that reduction in "benefit" amounts being paid to retirees in 2034/35 will be 21% or higher. These cuts are already required under present law, if the system becomes financially insolvent. Making an educated guess of what the percentage or dollar amount of reductions 16 or so years ahead, however, is iffy at best. (The financial solvency problems were reconfirmed on March 15, 2019. Former Federal Reserve Chairman Alan Greenspan was interviewed by Maria Bartiromo on her early morning FOX Business Network financial show. Greenspan said that Social Security actuaries had concluded that to maintain financial solvency, a 25% reduction in "benefits" should happen NOW. He said that this 25% reduction was buried on "page 200" of 2018 Social Security Trustees report . The 2018 report was released to the general public April 5, 2019).
- If the AFIF/SSP/AIWA system is implemented SOON, the danger of the 2034/35 depletion of money will become merely a matter of academic discussion.
- A question: Where and how will all the billions of dollars in the combined AIWAs of participants be invested? Please see the following points 9 - 15.
- Let's say the new AFIF/SSP/AIWA system goes into effect January 1, 2020.
- A five- to ten-year "look-back" period will be established. (Not the same thing as the ”phase-in” period mentioned in point 4. The phase-in is a future matter). The exact number of years in the look-back period is yet to be determined. Ten years would probably be best. Whatever length, the look-back period would end six months before the date the AFIF/SSP/AIWA goes into effect.
- For the ten-year look-back period, each of the 50 States will identify the two highest financial return, PRIVATELY MANAGED, public employee pension/retirement plans within its State. Call these the "Big 100."
- PRIVATELY MANAGED means that throughout the look-back period, investment organizations such as Edward Jones, Franklin Templeton, TDAmeritrade and/or others have been making the decisions as to where the pension/retirement money was being invested. No government bureau, legislative body, state executive agency, elected public official, “select” commission, or anything remotely similar, will have ANY power to decide where Americans AIWA money will be invested. A set of inescapable rules will be established to enforce the PRIVATELY MANAGED ONLY investment decision requirement.
- The PRIVATELY MANAGED-only approach will greatly reduce the chance of future "W"/Barack-type "Solyndra" catastrophes, where American taxpayers lost $535 million dollars on a "green" energy mess. Barack was primarily responsible for Solyndra, although "W" signed the enabling legislation into law. The $ 535 million is now part of the 22 trillion+ National Debt).
- As of January 1, 2020, the investment portfolios of the "Big 100" will be combined into something of a total market index fund. Call this fund the Wilshire 501. At present, there is a Wilshire 5000 total market index fund. The 501 will be a national "mutual fund", of sorts.
- Thereafter, as the 100 funds buy and sell securities, the aggregate 501 “portfolio” will be updated daily, just as the Dow 30, S & P 500, NASDAQ and others are now. The on-going changes during the market day might be shown continually on the FOX Business Network, and elsewhere, as is done now for the Dow 30 and others.
- Any participant will be able to get a full history of his/her AIWA on a smartphone. Every deposit of the 6.2%, and match, will show up as a line item. The total amount of "pay ins" will be updated as they are deposited into the AIWA. Any time of the day or night, the investor will be able to get the full history and current value of his/her AIWA.
- The Wilshire 501 will be very close to a total market index fund, like its cousin, the Wilshire 5000. Like the Dow 30, S & P 500, etc., the overall value will go up or down (likely a continual up), daily. Each participant's smartphone will show the daily value of his/her AIWA, along with the money deposits. In later life, the retirement withdrawals as well.
- Consider point 17. Won't every participant want to see a growing AIWA value? Congress desires reelection more than life itself. This reelection desire will force Congress, and the rest of the Swamp, to manage U S Government policies in a way that will maximize personal wealth creation and growth. AIWAs will belong to every American for a lifetime. Will a vast number of Americans become multimillionaires? At election time, voters will ask those seeking National/Federal offices, “Just what will you do to defend the USA AND increase the value of my AIWA?” ((Tax dollars should NOT be sent to Mongolia to study the "interrelationships" between Yaks and Great White Sharks. (Yaks are an animal native to parts of central Asia. Unless Yaks are co-stars with Great White Sharks in a Sharknado movie, the two will never meet)).
- The amount of lifetime "contributions" to Social Security "retirement" will be tallied as of the day before the AFIF/SSP begins, for every employed/self-employed American, regardless of age, as of the conversion date. This amount will be paid to the individual "contributors" through their retirement years, just like Social Security retirement is now, subject to the TAX status of the money.
- As the U S population ages and older Americans die off, the Social Security retirement payments will decline as a percentage of overall retirement income for individuals. Overall cost to the Federal Budget will steadily decline, as AIWA money available for withdrawals increases.
- While the next suggestion would not be mandatory, it would probably be a very good idea for some portion of the match portion (perhaps 25%?) be used to buy term life insurance for the participant(s). In case of an untimely death of a young mother or father, $800,000 or more of life insurance would be very useful to a young family. With such a huge market of potential life insurance purchasers, competition among life insurance companies should result in very low rates for a large dollar amount of term life insurance.
- Further, to lessen labor costs for American employers, they would no longer pay any portion of the 6.2% match. As part of future National/Federal Budgets, Congress would include a dollar estimate of the match portion for the upcoming fiscal year. That match portion would be built in to the yearly "invoice" amount the Feds would bill each State for its ratable portion of the Budget. With the CONSTITUTIONAL SUPPORT TAX (the CST) in place, each State would have the power to select the least damaging tax structure to apply to its citizens to raise the necessary amount of money to pay the Feds.
- A component of the AFIF/SSP/AIWA system is a Home Management Services (HMS) feature. Assume, sadly, a young mother with children under the age of majority passes away.
- A young widower paying the cost of the cooking, cleaning, child care, etc. to maintain a home, that the deceased stay-at-home mom would have been doing, would likely cost at least $40,000 per year.
- In recognition of this minimum of $40,000, women with underage children living at home would get 12.4% of $40,000, $4,960, deposited to individual AIWA. ((This is the basic idea. (The $40,000 could be higher, depending of the number and age of the children and other factors. Perhaps $100/week should be the minimum)).
- Assume a woman was receiving welfare payments for children AND had a part-time job earning $100 per week. Her weekly earnings would enable her to open an AIWA for the 6.2%, and match, on the $100. However, the actual dollar, and/or imputed value of the welfare payments, will be ineligible for the AIWA.
- Assume a woman, with minor children, was employed outside the home, and/or had self-employment income. Her outside employment income/self-employment profits would NOT eliminate the HMS feature. Her salary, wages, and/or self-employment profits would be combined with the HMS dollar amount to determine the total dollars to which the 6.2%/12.4% would be applied to determine the dollar amount to deposit into her AIWA.
- There might need to be a five- to ten-year “phase-in” period. Over the period, the percentage of the 6.2%/12.4% being paid in by/for each participant would be steadily increasing to 100% ownership at the end of the phase-in. With proper fiscal/monetary planning, the phase-in would not be necessary. Please see point 29. (Insurance actuaries would calculate, based on mortality tables, projected lifetime earnings, and other financial factors, the year-by-year percentage increase). As older Americans die off, the benefit expense payout would decline as the AIWA balances increased.
- Any “shortfall” in point 28 funding can be addressed by taking the advice of President Reagan’s first Budget Director, David Stockman. In his 2013 book, THE GREAT DEFORMATION, on page 709, Stockman lists ten Federal agencies that could be terminated. Roughly $500 billion yearly would be saved by this action.
- As stated in point 3 above, the source of money to pay the 6.2% employer/self-employed/home manager match, will no longer be paid by the employer or self-employed party. Point 22 above introduces the new mechanism.
- The yearly National/Federal Budget to be distributed among the States under the CST will contain an estimated amount for the needed match. This estimated amount will be included in the ratable shares of the National/Federal that each State is "invoiced" for each year.
- There are more details, but these first 31 points essentially tell the story on the USA’s personally-owned, personal-wealth-building companion with Social Security retirement, the AMERICAN INDEPENDENT WEALTH ACCOUNT (AIWA) system.
- As stated in the opening, the AFIF/SSP/AIWA system has two companion tax-change proposals. The first is named the CONSTITUTIONAL SUPPORT TAX (the CST).
- The USA’s first constitution-type document was the ARTICLES OF CONFEDERATION (the A of C). The A of C created the “Union” government of the original 13 States.
- Under Article 8 of the A of C the “common expenses” of operating the Union were divided among the 13 by an agreed upon formula. Each state legislature then taxed its own citizens/residents to raise its ratable share.
- The CST is a 21st Century update to article 8 of the A of C. When implemented, the CST will eliminate from the Constitution the monopoly power Congress has to tax. Future borrowing would only be allowed as part of a National Debt payoff program. No borrowing for new general spending.
- The shameful, shameful misuse of this monopoly self-funding power over the past 100+ years has led to the $22+ trillion National Debt, the deeply embedded Washington D C “Swamp”, and the countless wastes of money and spending lunacy that, sadly, are now common in the National/Federal Budget. Through this shameful misuse, the U S Government has forfeited any right it might have had to monopoly control over its own financing.
- Under the CST, each of the 50 state legislative bodies will, each year, receive an “Invoice” from the U S Government for its share of the National/Federal Budget. A formula, fair to all States, has already been developed to divide the Budget among the States.
- One tax-change component remains. Tariffs will remain as the only tax the U S Congress can lay and collect. 100% of tariff collections will be used for supplemental military benefits, focusing on Gold Star families, under the AMERICAN HEROES APPRECIATION FUND (the AHAF).
- There are those in America that would call these three proposals a “Tall Order.” However, remember that ANY proposal that will do some REAL draining of Swamp will be a “Tall Order.” These three, implemented as proposed, will drain the Swamp, and keep it drained. Individual wealth will shower into the pockets of all Americans, many of whom have never been wealth holders before.