Say Anything Blog

Hillary would like Americans to start putting aside $5,000 for every baby born in the country in order to defray future expenses like health care and higher education.  I’m sure she’s thinking of it as just another way to tie up more of our money in government, but the concept by itself isn’t a bad one.

Democratic presidential candidate Hillary Rodham Clinton said Friday that every child born in the United States should get a $5,000 “baby bond” from the government to help pay for future costs of college or buying a home.

Clinton, her party’s front-runner in the 2008 race, made the suggestion during a forum hosted by the Congressional Black Caucus.

“I like the idea of giving every baby born in America a $5,000 account that will grow over time, so that when that young person turns 18 if they have finished high school they will be able to access it to go to college or maybe they will be able to make that downpayment on their first home,” she said.

The New York senator did not offer any estimate of the total cost of such a program or how she would pay for it. Approximately 4 million babies are born each year in the United States.

I think we should use this model to eliminate Social Security as we know it and save taxpayers some money.  Here’s how:

Every time a new citizen is born in the United States we should deposit $5,000 in an investment account for him or her.  Now, remember that the average rate of return for the American stock market is between 10 - 12%.  But even if we conservatively estimate the return on that $5,000 investment at 6% (compounded monthly) after 65 years (the earliest year at which an American can retire and collect full Social Security benefits) we’re talking about $244,623.50.  And that’s based on a conservative calculation.  If we jump the rate of return up to 8% (not unreasonable for a retirement account) you get $890,854.61.

Now I’m not sure how much the average American ends up getting back from Social Security, but I’m pretty sure it ain’t almost quarter of a million dollars let alone over $800,000.00.

And cost?  Well, according to the article linked above some 4,000,000 Americans are born every year.  At $5,000/kid we’re talking about $20 billion annually plus administrative fees.  Which sounds like a lot, until you consider that we spend something like $3 billion a day on Medicare, Medicaid and Social Security already. Even if it cost us $20 billion in benefits and $20 billion in administrative fees every year, we’re still talking about a net savings if we can divest ourselves of Social Security.

Plus, just think about it.  People who die could leave the money they’ve saved to that point to their family and/or friends.  That could mean quite a windfall given the age, and that doesn’t happen with Social Security now (except with immediate family).

There are some wrinkles to work out.  Like what do we do about legal immigrants and such, but you get my drift here.  This plan would solve our Social Security problem and provide for seniors in their own age.  I mean, if we’re going to be forced to spend tax dollars on our own retirements, we may as well do it in a logical way that maximizes our returns.

So why don’t we do it?  I mean, Hillary’s already half-way there.  Probably because it makes entirely too much sense.  Plus, if Social Security money were all tied up in individual investment accounts politicians wouldn’t be able to loan it to themselves to fund other projects.