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The King of C-Span Attacks a Sacred Cow
Are we dreaming? A politician-and one who absolutely oozes ambition-has come out in public and said we should abolish Social Security.
The times they are a changin'. And Congressman Newt Gingrich (R-Ga.), the guy who brought us the "Conservative Opportunity Society" and made headlines with his grandstanding on C-Span, is making a play for baby boomer votes by pushing a plan to reform Social Security more or less out of existence.
He wants to abolish the Social Security tax on employees, effective January 1, 1989. His proposal, which he says he'll introduce as a bill in this session of Congress, would also require employers to pay workers the 7 percent of wages and salaries that they now pay the government in Social Security taxes, thereby giving everybody a one-time raise. (The portion that workers now pay directly is also 7 percent.)
People over 40 would simply have their take-home pay increased by the 14 percent of their income that now disappears down the Social Security drain. And these workers could collect full Social Security benefits on retirement.
Workers under 40, however, wouldn't be eligible for benefits. Instead, they would be required to pay 10 percent of their salary into the individual retirement accounts of their choice, thereby relying on private investments instead of government promises to provide for retirement.
Don't run out and contribute to the Gingrich for President fund just yet, however. The plan has quite a few catches. Most notably, it proposes a national sales tax to fund Social Security benefits for current recipients and those promised full benefits under the plan and for future retirees who would otherwise fall below the poverty line. One would expect this tax to decline as today's over-40 group exits this world.
Attorney Peter J. Ferrara (see Spotlight, Dec. 1986), author of his own plan to privatize Social Security, warns, however, that such a tax "tends to be insidious and hidden. Once you put it in, it may be very difficult to phase it out. If there is a weakness in the proposal, that's the weakness." Also, the fashionably jingoistic Gingrich wants to apply the sales tax to imports and rebate it on exports, thereby distorting trade in favor of U.S. goods.
Paul S. Hewitt, president of Americans for Generational Equity (AGE), notes that the new proposal tends to "take it out on younger people." Gingrich, Hewitt told REASON, "doesn't want to cut back on the consumption of anybody who is currently a senior citizen. He, in fact, would increase benefits for many senior citizens" by guaranteeing every retiree an income above the poverty level.
"It is essentially doubling the cost for the younger generation," Hewitt says. "They will pay the lion's share of the cost of today's generation of retirees while funding their own retirement. It is designed to spare even the richest senior citizens from any kind of sacrifice."
Despite the plan's flaws, Ferrara told REASON, "the fact that a frontline politician such as Gingrich is going to introduce this in Congress with cosponsors means the whole issue gets a lot more consideration." And that is definitely better than the current nightmare (see "Wipe Out!" Reason, Dec. 1986).
Car Buyers Are Getting Taken fora $3-billion Ride
To car buyers unlucky enough to live in a state that restricts the opening of new car dealerships: did you know you're paying over $3 billion per year for the privilege of being regulated?
This startling fact is revealed in a recent report by the Federal Trade Commission's Bureau of Economics. The report details the effects of what are known as Retail Market Area (rma) laws-laws that limit the establishment of new automobile dealerships in locations where dealers currently sell cars of the same make.
Under RMA laws, if a car manufacturer wants to open a new dealership, dealers in the vicinity can protest the potential competition by notifying a given state authority (the particular authority varies from state to state). When a protest has been made, the manufacturer must justify the proposed dealership on grounds of "public interest." The state authority (which in some states consists of special boards partially composed of car dealers) then decides the fate of the manufacturer-and consumers.