You fill in zeros in their earnings records. You freeze the current Social Security system in place. You in effect retire it, and then what you do is you force everybody to contribute to an individual account, a personal account. The government makes matching contributions to make it progressive. The contributions are split between spouses and legal partners so that a non-working spouse is covered, and then the entire investments are invested in a global market-weighted index fund by the government, by a government computer, not by Wall Street.

So Wall Street doesn’t get its hands on any of this money. It’s invested automatically by a computer and the government guarantees the downside so that people get back for sure an annuity based on what they contributed, adjusted for inflation.

So they are going to at least get a zero real return under what I am proposing, a floor to their investment return, but otherwise they are going to do better and then at retirement age their account balances are gradually sold off and converted into inflation-protected annuities. This is done by the government — not by the insurance industry.

So you are using private markets but you also have very strong involvement by the government and you have compulsory saving, compulsory annuitization, and you have a very simple solution to Social Security. And you save that system lots of money because you’re just paying the accrued benefits and not the projected benefits — and there’s a big difference in present value between those two things.

Do you believe a market-based retirement system will fly, considering how badly it was rejected when George W. Bush floated the idea?

Well, George Bush’s proposal was really halfbaked and a con job set up to enrich Wall Street. I’m proposing something where Wall Street makes nothing — zero. You know what that word means, zero? Zero. There’s no fees. There’s no involvement at all by Wall Street in what I’m proposing.

And I’m proposing something in a much higher scale with downside protection that’s doing all of the legitimate things that the government should be doing here — forcing people to save, protecting the downside, and then making sure that they get their old-age income in a form that continues until they die so they can’t run out of money and the insurance industry won’t be making money off of them.

So, yeah, I think this would fly if we really sat down and explained this to the public. What are the objectives of Social Security? What are the legitimate objectives? What’s the financial problem? What’s the solution that doesn’t involve paying middlemen who are out for themselves? Let’s try and use the financial architecture that we have.

The other point that you need to understand here is that there’s an illusion that Social Security benefits are safe. But what we’re seeing is tax hikes coming that are going to cut people’s net Social Security benefits because the threshold beyond where Social Security benefits are subject to federal income taxation is not inflation indexed.

So the next generation is going to get about a 20 percent benefit cut through that route. They are also going to lose probably about 20 percent of their benefits if the retirement age is raised by three years, which is what the Fiscal Commission is likely to propose. That’s a 40 percent cut in the Social Security benefits of my kid.

Now, you’re telling me that that is a safe system? What’s safe about it? It’s not safe. We’re just trying to confuse ourselves by not really realizing that the risk of this economy is coming at us either through the front door or through the back door. We can’t avoid it.

All we can do is try and make sure the risk is real risk, not man-made risk, and what we’ve done now with our fiscal problems and our financial system is set up a system with man-made risk, enormous man-made risk, and that’s what I’m trying to stop.

You suggest that all Americans should simply be enrolled in Medicare Part C. Elaborate, please.

Medicare Part C is exactly this medical security system I outline in the book and have mentioned here. Medicare Part C gives everybody a voucher which is individual specific. You don’t actually get a piece of paper in the mail if you’re in Medicare Part C. What happens is that you sign up with an insurance company and the government sends the insurance company some money, and the amount of money that they send the insurance company depends on your pre-existing conditions.

So, if we can get everybody enrolled in Medicare Part C, it’s an existing institution. It’s the Republican part of Medicare. Medicare is a Democratic program. Medicare Part C is a Republican part of it. If we can get Medicare Part C to work the way I am proposing, where the vouchers that are being handed out to the public — and I’m talking about including everybody in Medicare Part C, every single American in Medicare Part C — everybody gets a voucher and then you would have a panel of doctors.

You can call it a “life panel,” a “death panel,” I don’t care what you call it, but it’s a panel that would determine what is covered by the basic plan so that the total cost of the vouchers does not exceed 10 percent of GDP. That will do wonders for getting our fiscal problem under control.

Warren Buffett likes to talk up America as the greatest country for investors. It can be easy to attack economists as infected with negativity, that they discount ingenuity and resolve. What do you say to this kind of reaction?

Well, Warren Buffett is a great investor, and I think he’s a great American, but that doesn’t mean that our country doesn’t have fiscal problems. It has enormous fiscal problems. He’s not even probably looking at the magnitude of them. He’s probably looking at the official debt numbers as opposed to the true fiscal gap.

The fact that Americans are ingenious and inventive and resourceful, that’s fine, but if you have a fiscal system and a financial system that is a bureaucratic mess everywhere you look, how is that ingenuity and inventiveness going to actually get a chance to show itself?

You’ve got a tax system with 17,000 pages of IRS code. We have taxes within taxes within the income tax. You have a Social Security system with 2,728 separate rules in its handbook, rules that nobody can remotely understand.

You have a healthcare system that can’t control its spending. You’ve got Medicare and Medicaid and this new health exchange that has just been passed, three programs that are going to spend us into the economic grave.

So we have to fix things. And, you’ve got a financial system that is set up for people to engage in con jobs. We’ve just seen that, and nothing fundamental there has changed.

Jimmy Stewart is dead. We need to have a new financial structure. We need to have a new Social Security system, a new healthcare system, a new tax system, and we need to get control of defense spending because we can’t be running wars that we’re not winning.

Where should investors put their money now?

Well, I would stay far away from any long-term U.S. dollar-denominated bonds. So I would stay away from long-term U.S. Treasury bonds — by long-term I mean 10 years or longer — any longterm U.S. corporate bonds.

I would be concerned about investing in the U.S. market because of the course of our fiscal policy and the interaction with our financial fragility. We could have another run on our banking system that’s kicked off because of the fiscal problem. We could have a run on our bonds, and then we could have that turn into a run on our banks.

Now, that means you want to invest away from the U.S. You want to invest in perhaps Australia, which has a good fiscal policy; New Zealand; you want to invest in commodities. You are going to be relatively insulated from inflation.

Chile, Brazil, there’s other places around the world to invest in than the U.S. market, where there’s a concern that I have about what taxes will be on corporations in the U.S. and how productive the U.S. economy is going to be if we’re going to continue down this path of making bureaucratic answers to simple problems.