Gingrich calls for private retirement accounts

MANCHESTER, N.H. (AP) — Republican presidential contender Newt Gingrich on Monday proposed allowing younger workers still decades away from retirement to bypass Social Security and instead choose private investment accounts that would be subject to stock market gyrations.
The
former House speaker, who has risen in the polls, would allow younger
workers to take their share of the payroll tax that funds Social
Security and put it in a private account.
Employers
would still pay their share of the tax, which would be used to pay
benefits for current retirees. But it would create a funding shortfall
that Gingrich brushed off.
"That gap is more than covered by the
savings" that would come from giving states control of 185 social
welfare programs, Gingrich told reporters after a speech that laid out
broad concepts but lacked key details.
Gingrich's plan would cover
the near-term deficits by giving to states responsibility for such
programs as AmeriCorps volunteers, Section 8 public housing and Pell
Grants for college students. He said states were better suited to
administer those programs.
Gingrich said his retirement proposal, an idea floated by Republicans before him, would empower voters.
"Wouldn't you rather control your account?" Gingrich asked an audience of students at St. Anselm College.
His
advisers couldn't say how much the plan would cost, when it would begin
or who would be eligible. They did say, however, that current retirees
would continue to receive benefits at promised levels.
Peter
Ferrara, Gingrich's senior economic policy adviser, said federal
spending as a whole would be reduced by half within the next three
decades.
"It's a lot of reduction," he said.
At a business
leaders' breakfast earlier in the day in Nashua, Gingrich predicted that
the program "would save literally trillions over the next generation."
Under the plan, workers would be able to do one of two things: continue sending their share of Social Security
taxes to the popular, safety-net program or give it to private firms
that would compete for those dollars — as much as $20,000 a year,
Gingrich estimated.
"No one is ever forced into the (private account) system," he said after the speech.
Markets
would determine how much money workers who chose private accounts would
get each month. Gingrich guaranteed a minimum income in case Wall
Street collapses like it did in 2008.
As Gingrich spoke Monday,
stocks plunged several hundred points by midday as a special
congressional panel in Washington appeared ready to declare failure in
its attempt to agree on how to trim federal spending by $1.2 trillion
over a decade.
Under Gingrich's plan, the federal government would regulate the private accounts
run by private firms to ensure the portfolios were diversified enough
to prevent one company or sector from taking down the entire system.
Government approved firms then would compete for consumers, who could move their money among accounts based on fund performance.
Organized
labor and advocacy groups such as AARP would be allowed to collaborate
with the investment firms to tailor plans to reflect the promises they
make in pension plans.
Gingrich's plan also would treat the private retirement accounts as other investments, which could be passed on as part of an estate.
President
George W. Bush offered some similar proposals for Social Security after
he was re-elected in 2004, but faced stiff resistance from Democrats
and some within his own party about any proposed changes to the popular
program.
Workers pay a 6.2 percent Social Security tax on the
first $106,800 in wages, which is matched by employers. This year, the
tax rate for workers was reduced temporarily to 4.2 percent. The tax cut
is set to expire at the end of the year, though President Barack Obama
wants to expand it and extend it for another year. Congress is expected
to approve.