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Impeach George Bush
The REAL Truth about Social Security
As probably one of the most political of all subjects, the care of our honored americans during their golden years is of utmost concern, our own retirements and futures depend on us fixing this system, and soon. What does that mean?
Source: TheTip, 2004-12-17
Candidate: Republican Party
The promise of social security was to essentially force workers to save for retirement by giving the government control of a certain part of their present income.
This is a big chunk too - not just $100 here and there but generally 10-20% of the earned income of the individual (and its important that it's on the earned income - professional investors don't pay social security...).
Over a lifetime of work, the amount saved per person can be stupendous - if you work for 20 years averaging 60k/year, you will have put away around $180,000 not including interest. If you include interest at 4% (compounded only annually!), that'd be 270,000 - enough to buy a nice house in hawaii if you're so inclined. Compounded daily or instantaneously, it puts you well into the millions. Everyone here can agree that it'd be nice to have a million dollars.
Social security doesn't make people millionaires. Not even people who make more than 60k and work for more than 20 years. In fact, it leaves them poverty-stricken today if they were to rely on Social Security as their primary source of monies.
That's today - when there's enough money to go around.
In about 5 years, though, the baby boomers will be retiring. This means large-scale changes in the way our economy works.
The number of Americans age 55 and older will almost double between now and 2030 – from 60 million today (21 percent of the total US population) to 107.6 million (31 percent of the population) – as the Baby Boomers reach retirement age.
During that same period of time, the number of Americans over 65 will more than double, from 34.8 million in 2000 (12 percent of the population) to 70.3 million in 2030 (20 percent of the total population).
The most rapid growth in numbers is among the “oldest old.” According to the U.S. Census Bureau, there are currently 66,000 Americans older than 100, which is 20 times the number of centenarians who were alive in 1960. The Bureau estimates that there will be 214,000 centenarians in the U.S. by 2020 and 834,000 by 2050.
The bottom line is, that the number of people working and producing goods and services compared to the total population will be shrinking - quickly. This is, in some senses, good, in others bad. It means that competition for american jobs will be less, and pay greater assuming there are some to be had. On the other hand, it means that taxes will inevitably have to be raised to pay for the social security for the retiring millions.
Wait - they already paid, right?
Well, yes and no. They paid, but that money has been used - it's gone. It was used to fight several wars, bail out the savings and loan industry and fund NASA and star wars, to name a few fiascos. But the bottom line is, it's gone, kaput. Now the US Government has borrowed the money from the social security fund and needs to pay it back. But that's not working right now because we've got an additional 900 Billion dollar defecit to deal with again thanks to the smirking chimp.
Now defecit spending isn't always bad - sometimes you need to borrow money in order to hold you over to make more money later. But right now we've got a bigger problem. Our tax base for social security - the earned income workers - are becoming unemployed consistently, the number of actually employed people is lower month-over-month for four years (thanks again to the smirking chimp). The number of personal and corporate bankruptcies month-after-month is record breaking. In short, the tax base is dwindling and with the retirement of the baby boomers, it's going to continue to dwindle. Retirees don't pay social security, they get the social security...
This means that in this case, defecit spending is incredibly dangerous - spending without any reasonable expectation of actually paying it back is foolish as your creditors, when you don't pay them back, will become restless. In some cases it's possible to refinance, but when we're talking about refinancing the single largest financial institution in the world (the US government), the idea of refinancing is not appropriate. Instead, it's the stuff wars are made of. In this case, if the US were to default on our debt, we'd end up not paying china the money we owe them, and it's a considerable amount, and doing so would mean economic war, at least.
On the other hand, we could reduce the benefits associated with social security. But with the number of retirees approaching 30% and them being of the smart and likely to vote persuasion, the idea that any candidate could get elected that would try something like that is unlikely unless the Baby Boomers all of a sudden get a group martyr complex.
This means the last option - raising taxes.
Now raising taxes is always a bad word with republicans (and libertarians, of course). And generally, the need to raise taxes is a sign of poor fiscal responsibility - and certainly in this case. So finding a way out, no matter how ludicrous, is important for the Republicans - so they can go on being the party of less taxes. But this means shifting responsibility. If social security were privatised and benefits decreased, it wouldn't be the government's fault. Perfect.
But there are three sneaky little problems with the plan. First, we don't have the cash to actually start a private endowment of Social Security against market-based securities (bonds, stocks, reits, etc.). It would take billions upon billions of dollars to ensure the support of the current social security beneficiaries not to mention the near future baby-boomers. In fact, it would take more than the US government owes social security now - so it's a wash - we don't have the money now and if we privatised, we still wouldn't have the money.
The second sneaky little problem is the taxation issue - the social security TAX isn't up on the choice and privitization block - just the management. This means that the controlling force, the US government - that banckrupted the current system will still be in charge of collecting and distributing monies. What does that mean - that we still end up giving our money to the US government and hoping that they put enough in the stock market to cover our benefits. But this has never been the case before, and the idea of making it the case by preventing the US government to borrow from social security isn't up for consideration. This leads to our third problem - the sharks.
The whole idea is based on the premise that if the money were in the stock market/bond market or reit market, it'd be safer and grow faster. But this idea is ludicrous - the stock, bonds and reit markets are filled with sharks. They buy low and sell high and take advantage of the dumb money to make theirs. That's the free-market system. And in this system, the social security agency is surely the dumb money. People say that investing isn't like gambling, and that's true, it shouldn't be, but the facts of the matter stand that professional investors play the market like a game and they're out to take the suckers all day long. That's the deal. In fact, it's the sharks who really want social security to be in the game - the big money in the market today is mostly smart money - institutional banks with billions and billions of dollars with teams and teams of professional investors managing their money to ensure that they don't get suckered. They're well guarded, and seldom does a big investor get taken down on a sucker bet. But the US government, there's a lot of money just begging to be bled dry.
But even if social security were to work as a savvy investing agency, it would still have the problem of inflating the stock, real estate and bond market beyond any rationality. Remember the "boom" - when institutions leaked money into the market daily in order to gain market share - when money was so available that almost any internet business plan would get you a million in angel capital and maybe another 5 for your first round of serious investment? This made the market irrational in some ways - lots of money and resources were spent developing bad ideas that weren't able to produce anything of value in the long run. (Not to say that there aren't and weren't good internet ideas, just that there were lots and lots of bad ones!) There was, in effect, a glut of money. This made the idea-guys - the ones that spend the money and earn the money - very powerful in the exchange. High salaries for CEO's and CTO's and CFO's were the norm along with low and usually negative returns. That's irrational - and worse, insupportable. Companies that operate that way die. It's that simple. Companies need to make profits by being lean and profitable via traditional methods, like selling something that people want for more money than they paid for it. Right now the system seems to have corrected itself somewhat - irrational spending is low but so are profits. But today CEO's don't get funded 5.5 million for registering "chickens.com". But if there were an extra 900 Billion in available capital in the market from a source required to invest it, well, that'd be a different story. It would wildly inflate every security, bond, fund and reit out there as well as line the pockets of the CEO's who could return to the business of raising their stock prices instead of running a profitable company. And that's just bad news in the long run - it saps true value at the expense of the investors - and that's just what's likely to happen. In short, it'd mean massive inflation.
That's not necessarily a bad thing - unless you're saving for retirement or currently retired. If you're saving for retirement, you want your today dollars to be as close in value to your future dollars as possible, and this is exactly the opposite of the effect a Social Security money-dump would have.
So all in all, we've got to regard this privitization of social security idea as a bad one. It doesn't lower the tax burden, it doesn't make social security more secure, it doesn't make it keep up with inflation, it doesn't help seniors currently retired nor does it provide for future seniors. What it does is put money into the stocks and bonds and reit markets causing inflation and increases in CEO salaries as well as profits for savvy stock market sharks. Who is this is a good idea for?
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User Originated Comments:
From: calvin david retired
2007-06-01 00:00:00
p-ss the fair tax bill
From: Carol
2005-05-03 22:44:45
stop this privatization. we are not robots where
we need a little oil or a rag doll you can throw
away when its dirty we need our checks and
healthcare desperatly.please come down to earth we
need you !!!!!!
From: <-----------
2005-05-02 03:10:14
placing funds in a private account will be
extremely foolish
this again, is designed
for the rich as they can invest your hard-earned
wages; and knowing the stock market as most
do...it's a cr-p shoot!
also, did anyone
consider that the some of the exact people that
are encouraging this travesty are actually the
savings & loan banks that will retain the said
monies for you... so who will profit here?
certainly not the hard-working american citizen...
just another ways and means to screw the american
people.
maybe we should invest in
mattresses again and not banks as in days past.
From: Debbie Hosta
2005-05-02 02:53:19
it is so simple. look at the numbers. i know
it's not easy, considering the fact the u.s. isn't
at the top of the list when it comes to
intellegence and real numbers (scores) of our
students. take the amount of money taken out of
your pay check over the course of the average
working years. put the money in a private account
with just modest interest accumulation. the
average american works 20+ years or so. work the
numbers, get a calculator if need be. that person
would have more money than they ever thought
possible. the government is spending our money as
soon as they steal it from you! yes, the proper
terminology would be slave (american worker) and
slave master (government). look up definition of
"slave". if your hard earned money were in an
account collecting interest for 20 years....well,
please, just work the numbers! please don't think
i'm anti-american, just the opposite. we have
lost sight of the principles this country is
based on. i for one will never give up the fight
to help get this blessed country back to the basic
principles put forth by the founders so plainly
stated in the constitution of the united states.
From: Robbie
2005-03-22 14:44:14
john:
jesus said that money, not envy,
was the root of many evils.
you're quite
mistaken if you think that america doesn't breed
greedy people. very, very mistaken. what hole
have you been living under?
i agree that
we should cut taxes and get the government out of
our lives. i wish our government wasn't getting
us into wars that we're going to have to pay for
for generations to come while forcing me to invest
my money in the stock market when what i really
need is just a savings account.
apply
your principles to yourself.
"for in that
manner by which you judge, so also shall ye be
judged."
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