Michigan Republican Rep. Thaddeus McCotter unveiled a plan to reform Social Security at a Monday presentation hosted by the Heritage Foundation.
The plan is a fusion between privatization — which McCotter opposes — and the current system of entitlement financing via payroll taxes.
McCotter, who is campaigning for the Republican nomination for president, says that his plan would be “the greatest reduction of government spending and debt in human history.”
Under his plan, people under 50 years old would be permitted to voluntarily convert up to one-half of their Social Security accounts into private investment portfolios. Those portfolios would be crafted with government-approved investments, to ensure that their financial stability.
Funding for the individual investment accounts would not come from Social Security payroll taxes, but directly from the government.
The government’s funding, in turn, would come from massive spending reductions enacted by turning Medicaid and other programs over to state control through block grants, and through other unspecified spending cuts.
If a retiree’s investment portfolio should ultimately drop below what it would have been under the traditional Social Security model, the government would make up the difference.
Government guarantees of a baseline funding level would not be particularly risky, McCotter explained, noting that private investments typically yield far greater returns than government annuities.
During his presentation, McCotter emphasized the Social Security Chief Actuary’s pronouncement that his plan would eliminate Social Security’s projected deficits.
McCotter acknowledged that he had not consulted with the Republican House leadership, but said that he expects a positive response. (RELATED: McCotter seeks to fill foreign policy void in GOP primary field)
Asked what he thought about Texas Gov. Rick Perry’s pronouncement that Social Security is a Ponzi scheme, and former Massachusetts Gov. Mitt Romney’s rejection of that assertion, McCotter smiled and suggested himself as a “bridge” between the two.