Desperate times require desperate measures. That’s why I summoned, once again, the Supreme Grand Poohbah.
Forget the mealy mouthed, carping, ink-stained worrywart that you know so well. As your Supreme Grand Poohbah, I offer solutions. In due course, all workers will enjoy secure retirements. And the pesky employment tax – the largest tax most Americans pay – will end.
The Social Security program has its own sources of revenue, mainly the employment tax.
It is not sufficient to pay full benefits, because most Americans are living longer than expected. Some say benefits will have to be cut in 2035. A recession – perhaps one triggered by tariffs – could make it sooner. Worse, both political parties are working to bring that day even closer.
Democrats tell a nation that doesn’t want more taxes that all the money needed can come from taxing someone else – people with more money.
You’ve heard that too many times to believe it.
Republicans tell us tax cuts, preferably for the very rich, are the only way to bring in the money needed to grow the country fast enough to support Social Security. But that path has also never worked.
Ever.
You’ve heard that too many times to believe it, too.
A fork in the road
This problem has two solutions. It’s that simple. We can solve it with lives by shortening the lifespans of the elderly.
But I reject that. Besides, it would be wildly unpopular. Most old folks think being alive is better than being dead. They vote accordingly.
So, we must solve the problem the other way, with investment. It can be done. We need only think long-term.
Introducing the Century Fund
Here’s how it would work: Each American child, at birth, will be given a cash gift that will grow enough to provide them with a lifetime income at age 65.
The money will not be given to Wall Street to manage. It will be invested in a broad index fund of global stocks. It will be managed as the Century Fund at minimal expense, likely under 0.10% a year, including the administration of lifetime cash payments.
At a return of 10%, it would double nine times, with two years to spare. At a return of 8%, it would double eight times, with one year to spare.
The deposit for each child would be calculated at enough to grow to 20 times the 50th to 75th percentile of income for all households in their year of birth.
The median income is at least what half of all Americans earn. The 75th percentile is the income enjoyed starting at the top 25% of all households.
The income range for 2022 (the most recent year for which figures are available from the IRS ) was $50,000 to $100,000. At a starting withdrawal rate of 5%, that would require a fund balance at retirement of $1 million to $2 million.
But since each dollar invested at birth at 8% will have become $256, the investment at birth would need to be only $3,906 to $7,812. At an investment return of 10%, the initial investment required would need to be only half as much, $1,953 to $3,906.
That’s the long-term power of compounding when it works for us. Congress is in the habit of making compounding work against us.
How it compares to other spending
Now let’s leave the envelope scribblings and see what this might cost compared to other government spending.
Our national birth rate has been declining since 1957. Only 3.7 million babies were born in 2022, a birthrate of only 1.7. That’s part of the problem. This is lower than the 2.1 needed to sustain our population. If we multiply the highest and lowest investment required to fund the program, we get a range of $7.2 billion to $29 billion for the year.
That’s chump change in Washington.
According to the Office of Management and Budget, the total amount collected from the federal estate tax in 2022 was $24 billion. That was in a year when the federal estate tax exemption was $12.06 million.
Per person. For 2025, the exemption is $13.9 million. Per person.
A couple, this year, can have an estate of $28 million and not owe a dime in federal estate taxes. Hard to call that punitive. The money required can be raised, easily, by (1) reducing the estate tax exemption and (2) providing a double credit for each gift to a newborn. That’s called an incentive.
Call your minions
Exactly how would this work? Would it, over time, eliminate the employment tax?
Not my job. I’m the Supreme Grand Poohbah. Let the minions work the details. But I assure you, the fine print will be a delight.
In less than a century the employment tax will no longer be necessary. What a magnificent gift from wildly successful Americans to all the future children of America.
So, my fellow Americans, I have a suggestion.
Send this idea to the 535 minions that purport to work for us. Tell them to stop posturing, and start using their heads.
