Heritage Foundation

“Saving the American Dream”

Endorsement

We cannot endorse this plan. First, this plan increases the scope of Social Security. Second, this plan could be the most extreme version of means-testing that we have seen. Means-testing is our absolute least favorite approach to solving the problems in Social Security. This plan is really a mix of bad ideas and bad tools.

How Does It Work?

Saving The American Dream is a large scale plan for all aspects of government finances, but it completely re-writes Social Security. It expands the goal of the system, and pays for the changes largely through benefit cuts.

Strengths

It acknowledges that Social Security is broken, and attempts to address a problem within the system; that people retire too early.

Weaknesses

We completely disagree with this plan. The reality is that this plan transforms Social Security from an insurance offering to garden variety welfare. Welfare isn’t the American Dream.

Today Social Security provides income to augment a retiree's personal savings. Under the Heritage plan, Social Security would become a primary source of income and offer complete protection from poverty. We oppose this plan because it will take money from people in poverty, and give it to people who are well above poverty.

If we dislike this plan, it is because it could be the most extreme version of means testing in the market. “Limiting Social Security to Those Who Actually Need It”.

Distortions

The Heritage Foundation has jumped the integrity shark with this piece. It is a collection of bad ideas covered with a thick veneer of misleading advertising. They advertise ‘real insurance’ but then describe a welfare system. Retirees do not want welfare. This plan also talks about taking Social Security back to its original intent, and yet moves the system in a direction completely inconsistent with the founding principles.

Open Questions

This plan includes a new type of savings account for which you are automatically enrolled unless you opt-out. As written, contributions appear to be in addition to standard payroll taxes. If so, the plan would increase payroll taxes from 15.3% to 21.3%. These new accounts have a new name but largely provide the same service as Roth-IRAs. We are continuing to research this question, but we would question their claim that this isn't a new tax.

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