No, the title is not a Steve Martin joke. This came to me in a reverie:
1. Every present and future recipient of Social Security benefits was given a one-time option to take all his benefits in a lump sum.
2. The lump sum was equal to the present value of future benefits, assuming life expectancies and discount rates as shown in various Treasury publications.
3. The lump sum payments were not subject to income tax (ok, the heading was an exaggeration—income taxes were eliminated for this one item).
4. Many people elected the option--especially those whose health was poor--and trillions of dollars were injected into the economy, at once avoiding the buildup of a huge procurement bureaucracy and arguments over changes to the income tax code.
5. A good portion of the windfall was spent, thereby stimulating the economy, and the balance was deposited with financial institutions which desperately needed these funds.
6. The official National Debt increased, of course, but that was simply due to correcting the faulty accounting practice that had left the Social Security liability off the government balance sheet. What was unrecorded was now recorded.
7. Many lump-sum recipients continued to work. Their accounts with the Social Security Administration were zeroed out, and their future payroll taxes built up credits in a program akin to a defined contribution plan.
8. Some people blew their receipts on foolish expenditures and speculations, despite an intensive information campaign conducted by the government and the financial services industry.
9. The most interesting part of the political debate had little to do with money: it was over the conception of ourselves and our society---whether trusting individuals to make their own economic decisions made for a better outcome, knowing that a few would make poor, even disastrous choices for themselves.
10. Popular opinion in favor of this measure became overwhelming. Although those with the highest income received the biggest payments, Americans perceived this result to be fair since big contributors had paid the most into the system.
11. The DJIA increased by 2,000 points, presaging a sharp recovery.
Then I woke up. © 2009 Stephen Yuen
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