Davis Deficit Neutral Jobs Creation Plan ( Long Version )

Here is how it works ……The retiring baby-boomers, who are estimated to be 68-72 million consumers will retire over the next 18 years at a rate of  approximately 10,000 per day, and they do not currently have the option of taking partial distribution payments from the Social Security Trust Fund. It is important to note, baby boomers are consumers and consumers account for 70% of the economic activity in this country. You can not have a healthy recovery without involving the consumer.

While this has long been an option in the private sector, government sponsored Social Security, the largest payer of retirement benefits in the world, does not offer this option. Why? Maybe , no one has asked.  Please note, private sector  retirement funds are required to offer you the option of  taking partial distributions!! 

However, there is something the government can do about this !! The federal government can and should modify its policies for retirees to make it possible for them to take up to $20,000 or $40,000 dollars in a partial distribution payment from their Social Security Retirement Fund, leaving the remainder of their retirement funds to be received in monthly annuity checks. For example, if my principal is $170,000 dollars ( the amount my monthly Social Security check of $1,000 dollars is based on ), and I chose to roll over a principal of $150,000 dollars to Social Security, taking down $20,000 dollars to use as I choose, the federal government should alter the laws governing Social Security to allow me to do this. And this plan will not bankrupt the Social Security Trust Fund, because the Social Security Trust Fund owes these boomers the money anyway. Keep in mind, my monthly Social Security check will be reduced correspondingly because it now based on $150,000 dollars rather than $170,000 dollars. All Social Security will be doing is extending a partial distribution payment option of up to $20,000 or $40,000 dollars to eligible recipients(retirees )it will be paying anyway! To incentivize the plan, waive the taxes on the first $20,000 dollars taken down for my personal use or if they do tax it, tax it at a reduced rate. Why is this a good plan? It is simple and most Americans will understand it, it cuts across all income groups and it is a plan of some moderation, as the baby-boomers will not all be retiring at the same time. The retirement of baby-boomers will happen in a bell-shape graphic, steep enough to have an immediate affect upon the economy, as this was the curve on which they were born, bell-shaped. The pool of capital is significant enough that it will have a stimulus impact and affect all sectors of the economy, that is, car purchases, housing, travel, manufacturing, big-ticket, and small-ticket items and the service sector. The federal government and the private sector owes the boomers these funds anyway, however extending the partial distribution option in relationship to Social Security and modifying the taxation of the first $20,000 dollars withdrawn from a retirement fund, Social Security included, the federal government effectively creates a pool of capital big enough with some consistency, which will stimulate the economy, in a tempered fashion. The impact of this plan can be measured, unlike, the current plan of tax cuts. The federal government will  put a significant amount of  money directly in the hands of the consumer. It’s their money!! The government acknowledges capital handed directly to consumers turns over at least two to three times !!

Why is it deficit neutral ?   Because Social Security is paying out money it already owes, however it is paying it out in a much more useful  way to the consumer.  And the boomers are taking a decreased monthly payout based upon the Partial Distribution amount taken. Instead of taking equity out of the refinancing of homes which powered the last economic upswing, I am saying give the wisest group in term of age, an opportunity to take some equity from their Social Security principal. The federal government if it so desired could buttress the trust fund for these up front partial distribution payments if it felt it would influence the viability of the trust fund.

Baby-boomers as you may well know, are those Americans born after 1946, up to 1964. If every single boomer, calculated at 70 million, chose the option of taking down the first $20,000 dollars in a partial distribution payment from the Social Security Retirement Fund, it would amount to 1.4 trillion dollars. They could dump as much $200,000,000 dollars ( $20,000.00 x 10,000 ) into our economy each day. On an annual basis, that would come to approximately $73 billion dollars.  Calculating the federal government’s collection of taxes on $20,000 dollars @ the 25% rate, the treasury would forego, not lose, an additional $350 billion dollars bringing the total of this package to approximately $1.650 trillion dollars, spread out over 18 years. There would be some additional revenue foregone, not lost, to the treasury if the $20,000 dollars tax relief were also extended to the private sector. Can You, Imagine, the stimulative impact, if the allowed amount, boomers could take down were doubled to $40,000.00!!  That would amount to a possible $400,000,000  dollars being dropped into our faltering economy every day! ! Put a pencil to these numbers and see if they do not add up.

Republicans and Democrats do not get everything they want with the Davis Plan, but they do get some of what they desire. The middle class and the very wealthy are all affected by the waived or reduced taxes on the first $20,000.00, and our economy gets the needed shot in the arm immediately as the baby boomers put the partial distribution  payments to work, buying the things they need for a comfortable retirement from paying off bills to purchasing houses and cars, underpinning the recovery.

The primary criticism   you should be aware of,  from critics of this proposal is, Social Security is a benefits program with a cash hoard that exist only on paper. That criticism is unjustified and no more than a “sound bite,” because at the end of the day, the trust fund is really based the taxing power of the United States government, and the will of Congress to use that power to replensish the trust fund.  As of January, 2012, , the checks for the first class of boomers  “rolled out,” without a hitch. So much for the credibility of, “Cash hoard only on paper,” comment. This proposal simply suggest checks be “rolled out” in a manner, which will be beneficial to ending  this horrific downturn. Understanding  Congress may have to borrow the money to facilitate the payout,  this is a “win-win” situation for both the government and the Social Security recipient. Why? The government’ own records indicates money handed directly to the consumer turns over 1-2 times. When the velocity of money increases, theoretically the economy improves.   The reason we know this is the case, because when the consumer stops spending money, the number of times money turns over falls, and GDP (Gross Domestic Product) falls, thus the economy suffers. Since, the federal government knows the money it will be handing to the Social Security recipient will generate economic activity, it is one debt the federal government should want to incur, because the result will be multiplied revenues in the system which should result in more tax income. Therefore the federal government will be getting a bang for every dollar it releases in the form of a partial distribution to a Social Security recipient. Contrast this to spending money on building a bridge, buying a new battle ship, or even building a new road which will not generate the same economic activity.

 “Let the people have their money, and let them have it, abundantly.”

They will also say Social Security is not set-up the way pension funds are, in that, it is based on contributions, thus figuring out what the principal amount of one’s contribution maybe difficult. This is not true. Because Social Security pays a fixed monthly amount, the underlying principal amount can easily be calculated based on today’s prevailing interest rate and they know this!!

Our objective should be to have Congress enact legislative changes to Social Security to make it possible for boomers to take down up to $20,000 dollars in a partial distribution(OR PERHAPS $40,000 dollars) from their principal amount if they so desire, when they are eligible. After all, we paid into this system. ( I feel it s/b offered to all retirees @ 66 years of age who are taking down “full” retiree benefits ). www.sslumpsum.com

“If  we do not cease,” we will make a sound, which will be heard in Washington, D.C., in the halls of Congress and its surrounds!! You matter. Make a different !!