Case Study: The Cato Institute

Decent Essays
The libertarian leaning Cato institute has come up with a solution to reform Social Security. The so called 6.2% solution would let workers divert half of their Social Security payroll taxes to individually owned, private investment accounts. The remaining half of payroll taxes would fund transition costs as well as survivors’ and disability benefits. Currently, the Social Security payroll tax rate is 12.4% with half coming from employees and the other half from employers. Those who opt into the private investment accounts will forgo traditional Social Security benefits. Additionally, workers could trade recognition bonds on secondary markets that would have a value corresponding to how much money an individual has already contributed to the Social Security program. However, the plan does allow individual workers to stay with the traditional Social Security model if they choose. Supports like conservative activist Mark Etz say the plan will encourage free market activity and allow individuals to take ownership of their retirement. Mark Etz…show more content…
Republicans will largely support the plan, because it promotes free market and small government principles. However, some Republicans may defect because of the potential political consequences for supporting the Cato institute’s legislation. Social Security is very popular and changing it may weaken Republican Congressmen’s prospects for reelection. Democrats, on the other hand, will strongly oppose the legislation and spin it as a partisan policy. They will argue the plan helps the rich and messes with a well run government program. Overall, for the plan to pass, the Republicans would likely need to keep the House, win the Presidency, and a filibuster proof majority in the Senate. Additionally, the Republican Party would need to be unified to pass the legislation. All of this seems unlikely and therefore the Cato plan has little chance of becoming
Get Access