This page is established to debate Social Security, the program.
First a few facts about Social Security as of January 2005,
- There is no money in the Social Security Trust Fund, it has all been spent. A record has been kept, so we know what's supposed to be there and who borrowed and spent the money (hint: other government agencies, and it's part of the National Debt).
[[[ - Currently workers are paying more into Social Security than beneficiaries are taking out. Money going into the program is paying the benefits, and what's left over is being "borrowed" by government for general budget spending.
- By 2018, using the current rates, there will less going into Social Security than it is paying out. Then the Social Security Administration will have to call in the debts. [Where is that money going to come from?] ]]]
UPDATE: as of 10 August 2010, the situation has reversed. Now, more is going out than coming in.
- If you are a worker and being paid a salary, 14% of your salary is being taken from you and given to current retirees. When you retire, your Social Security income will come from the payments of workers; and the ratio of workers to retirees will not be favorable. You have no control over the money taken from your salary for Social Security. [Conservative politicians want you to have control over part of it, Liberal politicians do not.]
Here is an excellent article by Donald Luskin of the National Review showing both sides of the argument on whether Social Security needs fixing.
"The Social Security Trust Fund is simply a meaningless record of taxes that have been collected for future needs, spent for current desires, and then recorded and counted as an asset, .... If we try to create assets for ourself at our local bank by simply recording numbers in our checkbook, I am sure they would not honor such action as a real asset. I suspect that the IRS would consider such action in creating a deduction on a tax return to be fraudulent as well." John Harker.
How do you contribute to this debate? Simply send a short, direct, email to firstname.lastname@example.org. Don't send an attachment, make it text in the email.
Here's hoping you're smart enough to provide for your own retirement and don't plan on relying on SS!
Bob K: "SS doesn't need to be fixed, it needs to be PAID BACK. I say next election vote everyone of the greedy idiots out and new ones in until they understand they work for us. The people that vote are more or less the idiots.............they keep voting the crooks back in a 3rd grader would know better than believe the lies I think to get into office they should have to sign a contract you don't keep it you are out."
Mark G: "The SS tax should be a flat tax. [No cap...ndac]
The best way to accomplish this is make it an employer tax on all compensation given to an employee. All workers should be required to open a treasury account and put a percentage of their earned income into buying only US treasury securities.
Benefits should remain unchanged for now, but should be slowly reduced as worker's treasury accounts build equity. MORE.
Tom W: So far, all proposed Social Security System fixes deal with the symptom, not the root problem.
The root problem is the (assumed) SS funds, which are just Government IOU's. There is no real money there, it is spent. That is the problem.
Any supposed interest return is really just our future taxes coming in. T-Bills and T-Bonds just don't work for funding a governmental distribution program.
The SS and Federal budget deficits could be fixed simultaneously and completely, just by buying bank CD's and long-term money market funds with the incoming SS taxes. The SS trust fund would be totally secure, for those who fear theæstock market, oræit could be aæconservative mix of secure and stable mutual funds, etc. (Anything that has real interest), even if only 4-5% annual. The point is, it's real money earning real interest, not future taxpayer debt.
Second, cut the Federal budget by the amount that is being siphoned from the SS fund. Balancing the Federal budget would actually lead to paying off the National Debt. Reducing the debt would save huge (interest) money. Everyone gripes about deficits.
Third, leave the SS tax cap where it is ($90K), which gives the feeling and function of a private account for anyone who can exceeds that cap in a given year.
The extra money can go into existing IRA's, which accomplishes the goal ofæhaving private accounts, without any governmental infrastructure cost.
This is a much better idea than the others, and one we could all agree on. Clearly, it should have bi-partisan concensus. Why has noone suggested this before?
Alex: "Social Security is ... most successful domestic program in U. S. history". NDAC asks "successful at what?" The answer is ... it is successful at taking money from workers and giving it to retired people." And that is what was intended. It was not supposed to support government. The first fix would be to put a lock on the fund. Cut government spending, even if it hurts. Give president line item veto. Campaign reform to stop all interest groups. There should only be one group "the public" and we already pay these idiots.
Tom: President Bush is right in trying to give individuals more control over their own retirement accounts.æ Personal accounts, guided by professionalæinvestment managersæand government oversight, would have a better chance of providing a secure retirement because they would be invested in the economy, upon which all wealth depends, including the government's.æ In addition to shifting Social Security deductions to economy-based investments, we should consider allowing adults to open IRA accounts - preferably tax deductible -æfor children as young as, say, one month old, and funding those accounts with monetary gifts until the child reaches maturity.æ This would give those children an extra two decades or so of compounding investments and would stimulate the national rate of saving.
æ Admittedly, not all children would or could have such accounts opened for them by friends and family, but for a large portion of the population, it would provide a tremendous incentive to make meaningful gifts andæprovide for the future of their young loved ones.æ I suspect that theæpopularity and success of such a program would encourage philanthropistsæand community service groups to donate to such accounts for children in low-income families.
æ To assure that there is an equitable trade-off between the haves and have-nots of the program, a ceiling could be placed on the portfolio valuesæof these accounts at the time the child reaches retirement age, above which he or she would have his or her traditional Social Security payments reduced.æ This would gradually reduce the pressure on Social Security taxes and payments.
Miriam: I'd be very surprised if you don't know that the short version of the story is that Social Security will not need to be fixed for many years to come, if at all. The current system of "overpaying" into Social Security was put into place in the early 1980's (Alan Greenspan headed a commision and this was the outcome). The purpose was to make sure there would be enough money to pay benefits for the baby boomers retirement. At the time, they decided the government would lend the money in this surplus trust fund to itself, in the form of T-bills, until it was needed. By law, the US govt must re-pay the money that was borrowed from the Trust Fund. The T-bills in the trust fund are no different than the T-bills any other investor buys. If the US gov't defaults on the T-bills in the Social Security Trust Fund, the negative ramifications will be much greater than just the loss of the Trust Fund. Furthermore, in order for that to happen, Congress will have to pass legislation to change the law that was passed back in the 1980's that established the Trust Fund.
It's not to say that Congress might at some time pass a law erasing the SS Trust Fund, but that would be very difficult politically (just look what happened in 2005 when Bush tried to partially privatize Social Security). Therefore, to say that the SS Trust Fund is a Ponzi Scheme is misleading and inaccurate.
The biggest financial problem facing us is medical costs, which are spiraling out of control, and are higher than in any other western country. There is no problem with Social Security that a little tweaking won't fix. Please don't scare people into thinking that Social Security won't be there when they retire (unless you are one of the people who think we shouldn't have Social Security, in which case your agenda is clear).
Thanks for listening.
Send your solution or comment to ndacboss.
Gene Simmons, Director, National Debt Awareness Center
Go to National Debt Awareness Center web site.