OCR Text |
Show THE VOICE OF BUSINESS ; Losv: Our .Till ion ; 5 dollar tfrustf fund ' By Richard L. Lesber, President Chamber of Commerce of the United States By now, most Americans have heard that with the new year has come a tremendous new economic opportunitythe op-portunitythe right of every worker to open a tax-deferred individual retirement account (IRA). As wage earners sort out the many ERA options available, we will likely witness an explosion of new saving and investment in such accounts that will, in turn, contribute to lower interest rates and greater prosperity. In short. IRAs represent the sleeping giant of the Reagan economic program. But this promise of greater savings and greater self-reliance during retirement leads to some interesting speculation about what might have been if we had pursued a comparable course from the very beginning. The concept behind an IRA is similar to that of a trust fund in which deposits are invested to generate a maximum amount of return over the years. The hope is that by the time the beneficiary retires, he is able either to live off the yearly interest and dividends or pay himself a sizable annuity for the rest of his life. This was the purported concept behind Social Security's Old Age and Survivors Insurance Trust Fund (OASI) when it was established in 1935. Yearly tax contributions from workers and their employers would be tossed into a kind of national IRA, with the funds invested over the vears to make the account grow far beyond the amount of the deposits. Unfortunately, Social Security has been operated instead in-stead as a pay-as-you-go income transfer program. No sooner are the tax dollars of the workers and businesses taken out of their pori : w hen they are paid out to beoeficia.Ta,. ; less a sizable "handling charge" fori; federal bureaucracy. But what if Social Secnr'i ' retirement program had been ope-iii" as a collective IRA, with benefts ptfr from the accrued interest and dinaai only? The figures are astam -From 1937 through fiscal 1962. the 0.3 fund has collected over $1.05 triEii T-these T-these dollars had been allowed tt r-cumulate, r-cumulate, 1981's total Social Secs-7" retirement bill of $119 billion could !s 1 been paid entirely from the yai: earned interest, assuming a rate of 'J percent. If the funds had been invsi ; in, say, high grade corporate bouif: 15 percent, we could have increti: pensions by 33 percent without e touching the original fund. - Moreover, the $118 billion in tns-added tns-added to the retirement fund last : would have effectively doubled !k: personal savings of the Amesa-people. Amesa-people. The $1.05 trillion trus! fai could have provided a capita! vestment pool to rebuild our ec err and create jobs, the like of wtect -world has never known. : Unfortunately, reality forces me i." burst this bubble. Instead of a nasxil,. retirement trust fund in excess aft! . trillion, the OASI fund balarw W ; sunk to about $20 billion by the eoi i I FY 191 s little more than two mxii ; worth of retirement rDtf;3. Somewhere, somehow over a tr-ia dolalrs of our savings have been losta the shuffle! Of course, most of our politicians tel us that Social Security is cornpie . "untouchable." that it would hf impossible im-possible to ever convert the prest: system to a sound national . vestment that it is too late. Or is it? |