A compulsory Australian-style system would burden workers, not fix Social Security
On Marketplace Morning Report, David Brancaccio broke down Trump’s interest in importing Australia’s compulsory “superannuation” model, under which employers must funnel 12% of pay into private retirement accounts. Brancaccio quotes Boccia on what carving private accounts out of the existing system would actually require:
“Any portion of the 12.4% payroll tax that would be diverted toward a private retirement account would need to be replaced, unless Congress was willing to significantly and suddenly cut benefits for seniors, which seems politically very unlikely,” said Romina Boccia, director of budget and entitlement policy at the Cato Institute.
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“In economics, we refer to this as ‘Bootleggers and Baptists.’ When you have industry, that stands to gain, get together with so-called ‘do-gooders’ who think they can make Americans better off by forcing or nudging them into a system that they might not otherwise choose, you get this perfect combination of political support building between different factions, all moving in one direction.”
In USA Today, Daniel de Visé examines whether the model could reshape American retirement, and quotes Boccia on who really bears the cost:
Employers fund Australian retirement accounts. But “it’s misleading to say that it’s the employer contribution,” said Romina Boccia, director of budget and entitlement policy at the libertarian Cato Institute. Ultimately, she said, “it comes out of workers’ wages.”
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Boccia says mandatory retirement savings would hurt low-income workers, who might need all of their paycheck to cover the expenses of daily life. Many workers who forgo 401(k) plans “probably have a very good reason for doing so,” she said.
The Pentagon shouldn’t own defense companies
In The Washington Times, Ben Wolfgang reports that the Trump administration has taken direct equity stakes in more than 20 private defense and critical-minerals firms. He quotes Tad DeHaven on why ownership is the wrong tool:
“If Congress believes a small defense company needs capital that private markets will not provide, it can appropriate grants or use other tools. The Pentagon already has the authority to use contracts, cooperative agreements and grants for eligible research and development projects,” Tad DeHaven, a policy analyst at the libertarian Cato Institute, wrote in a recent analysis. “Ownership means continuing federal financial interest in a company’s valuation, which is precisely what creates the favoritism, conflict of interest and political pressure risks Congress should be avoiding.”
Refocus Social Security on poverty prevention
In Reason, Veronique de Rugy warns that the senators elected this fall will be in office when the retirement trust fund runs dry and triggers an automatic 22% benefit cut for everyone. She points to Boccia and Nachkebia’s analysis:
As the Cato Institute’s Romina Boccia and Ivane Nachkebia documented, seniors aged 65 to 74 had a median net worth of $410,000 in 2022, compared with only $135,600 for those aged 35 to 44 (who pay a significant share of the taxes). Roughly 34 percent of Social Security dollars go to filers with adjusted gross incomes above $100,000. Too often, Social Security is less a need-based program than a transfer of wealth from the young and unpropertied to the old and comfortable.
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The best reform is one proposed by Boccia: Return Social Security to a mission of poverty prevention. The Congressional Budget Office estimates that giving new beneficiaries a flat benefit at 125 percent of the poverty level (roughly $1,660 a month) would erase the entire 75-year deficit while raising benefits for the lowest earners.
Reconciliation package creates fund for states implementing Trump’s voting restrictions
In Marketplace, Nancy Marshall-Genzer reports that the House Budget Committee advanced a $95 billion reconciliation package funding defense, the war against Iran, and farm relief. She quotes Boccia on the bill’s fund for the voting restrictions Trump has pressed for:
Romina Boccia, director of budget and entitlement policy at the Cato Institute, said the money will probably go to states that do things like “verifying ID and citizenship before registering people to vote.” That’s a far cry from actually passing the voting restrictions Trump wants.