Alternatives to the "Ponzi Scheme"

More than 30 years ago several Texas counties opted out of Social Security for their county employees, and the result is touted by many as an alternative model that should be adopted nationwide.

This alternative program is essentially similar to that adopted by Chile and several other countries after discovering that the Prussian/Bismarkian model is unsustainable. In the United States, it is also unconstitutional, in two main ways: the FICA tax is unconstitutional and the payout is unconstitutional. As such, the Chilean system would also be unconstitutional if mandated at the federal level. If mandated, it would have to be at the state or local level, and as these Texas counties have shown, it can be done, and should be done, at the county level in most states, and perhaps also in federal enclaves like the District of Columbia created under U.S. Const. Art. I Sec. 8 Cl. 17.

However, there is a problem with government mandating savings or investment and also choosing the investments, because if those investments fail to perform, people would be looking to government for redress of their losses. Choosing how to invest creates a fiduciary duty. Therefore, the workers need to own that choice and the consequences of failure. Government might broker but should never advise.

There may also be a constitutional problem in some states with state or local government mandating investment in that way. To avoid a constitutional challenge there needs to be a way to opt out, particularly on principled or religious grounds.