Skip to comments.Social Security, Just The Facts
Posted on 05/24/2005 8:49:43 AM PDT by Values313
Social Security has unjustly become a political football where discussions are based on fragmented and deficient information. This has produced half truths and innuendos resulting in inaccurate ideas and resolutions as a means to validate the particular argument being presented. Instilling fear has become the method of a broader strategy in hopes of manipulating the masses thereby controlling their opinions. Perhaps the following information may aid in a clearer understanding of the program from its inception to the current state of affairs. President Roosevelt introduced the Social Security program and promised participation would be on a voluntary basis. Participants would only be required to invest 1 percent of the fist $1,400 of their annual incomes into the program. The money paid would be tax deductible and would be deposited into an independent trust fund. These monies would only be used to fund the retirement program. Two of the most glaring promises of this program, one being the retirees payments into the fund would never be taxed as income, the other of an independent guaranteed trust fund were ultimately broken. The truth about the program in light of today is were taxed on 85 percent of the monies being paid into the fund and the trust fund quickly disappeared when the revenue was transferred into the General fund. The Interstate Highway System initially proposed in the late 1930s for interstate commerce and defense purposes, realized little traction until 1944 then again in 1952 when funds were authorized for construction. Under the leadership of President Eisenhower, the Federal-Aid Highway Act of 1956 served as the catalyst for the Interstate Highway Systems development and ultimate completion. President Kennedy, along with others, was an advocate of utilizing the vast amounts of money existing in the general fund for financing the Federal governments obligation towards the construction. This suggestion along with multiple others always concluded the monies would be borrowed with the stipulation of being returned to the fund including interest as quickly as feasible. The feasibility for repayment has never materialized. Lyndon Johnson, along with the Democratic controlled House and Senate, removed Social Security from the trust fund and placed it into the general fund where it became easily accessible to Congress being utilized on a case by case basis as the need arose. Later, they placed an additional tax on Social Security with Senator Al Gore casting the deciding vote to approve the measure. Jimmy Carter along with the Democratic Party then passed legislation providing Supplemental Security Income to immigrants who have never contributed a cent to the fund. In 2018 we begin the cycle of negative growth with baby-boomers entering the program only to place it in the red. The so called fund starts spending some of the interest it supposedly earns on the 1.6 trillion currently held in Treasury bonds. I say supposed because the interest received is absorbed by other needs as they may arise since Congress has access to the monies through the general fund. The projections of the Social Security Trustees (2042) and Congressional Budget Office (2052) are valid on one condition; the government refrains from their continued use of the money along with the supposed interest of the fund. How can interest be paid on revenues not existing? Social Security has accumulated an excess on paper since 1983 theoretically investing the surplus. Documents revealing the glut of revenue are often referenced to justify various spending programs. This fallacy is never acknowledged nor addressed by those who advocate leaving the program in its current form. They continue to selectively note the continuing growth of revenue from 1960 (22.6 billion) to current being (1.6 trillion) purportedly directed into a fund incorrectly referencing the trust fund. The growth has been stated correctly yet is currently retained as debt in Treasuries that must be paid eventually with interest. This renews the argument of returning the money to the Trust Fund thus removing it from the General Fund. Accountability would then reign providing a vehicle for accumulating a dedicated interest intended to satisfy the demands of the future recipients. How naive are those that continue to believe a trust fund still exists based upon a Google search of the internet. Yes, it does exist as a word on paper as I mentioned earlier but only in a column on a ledger as a way of record keeping. Adding insult to injury and customarily ignored, is the loss of benefits in the event of death occurring prior to age 62. These potential recipients lose virtually every penny paid into the fund. Nothing to pass on to a remaining heir as would be the case with a small portion being invested in a Personal Investment account. Yes, there are some reduced benefits for survivors including children but trivial in the overall consideration of benefits paid into the system verses those received. Some economists including those associated with groups as the Economic and Policy Research seem to factor in assumptions into their analysis. This isnt responsible and doesnt lend credibility to the arguments presented. One assertion acknowledges 3.3 workers currently pay into Social security for every beneficiary; by 2035 there will be only 2.1. They consider this to be irrelevant since most of the baby boomers will be dead by this time. This assumption I beg to differ with since we are all living substantially longer, steadily increasing our years with the advances of technology and medicine. Another assumption is the claim productivity (output per hour) will grow substantially in the future so we wont need nearly as many people to support a larger retired population. Should we count our chickens before they hatch as many a fool has done in the past? Lastly, the economic environment isnt correctly weighed when assuming patterns from the past to dictate the future. Social advocates are calling for the current ceiling of contributions into the Social Security program to be raised. They argue this untapped resource exists that the government should draw on as quickly as possible. This resource is beyond the annual limit that currently stands at $90,000 or 6.2 percent totaling $5,580.00 a year. Those who earn over this amount contribute the same dollar amount yet the ratio is reduced as the income rises. If earning $150,000 a year for example, the percentage is calculated at 3.7 percent and the proportion is even lower totaling 2.8 percent for those earning $200,000. Individuals who are fortunate enough to make $1,000,000 a year, the fraction is a meager .06 percent. Still, these promoters fail to realize that large earners for the most part, will not be utilizing the program since their incomes have removed the need. The question then becomes why should those who do not utilize the program be forced to contribute more than the recipients? In the event tragedy occurs to a large wage earner where the need arises to utilize the program, they may do so since having fulfilled their obligation as every other citizen. In this scenario, the program abandons its original intent as a joint savings/investment venture between individuals and government becoming another social hand out. If the current threshold is raised from $90,000 to $120,000 one last time, which would help alleviate the strain and improve the long term solvency, it remains important to retain the current age requirements. Retaining the current retirement age is an integral part of the overall effectiveness of the plan in light of the current trend of corporate America which consistently works against the program. By reducing their obligations through the reduction of benefits and/or lay offs only extends the gap that currently exists between normal retirement age and the receiving of benefits. Documented is the fact that companies will lay off an employee immediately prior to fulfilling the retirement age and/or service requirements in order to alleviate their obligation to pay benefits. My wife provides a glaring example of this widespread practice where after 30 years of service and 6 months prior to fulfilling the age requirement, was terminated through a lay off. In this widespread scenario, the individuals are in their mid-fifties and considered as undesirable to most companies. This undocumented practice makes it difficult to secure comparable employment as a result of their age and the higher compensation usually commanded through their previous experience. This can potentially place those who are affected into poverty and/or on some type of social program further burdening society. With the loss of retirement benefits through corporate Americas greed and unable to access their Social Security benefits, since the eligibility period has been pushed out increasing the gap, will only add to the difficulty Americans are currently facing further degrading the effectiveness of the program. For government to join corporate America and further increase the gap would only add to this negative equation. Personalized accounts as the President has alluded to, is one of the approaches in which the program could be shored up and may be comprised as an add-on. This would supplement not replace Social Security as originally reported. Contributions to these supplemental accounts would be voluntary but encouraged by generous tax incentives and possible Federal matching contributions. This could aid households of moderate to low incomes to build adequate retirement savings. These accounts would offer only a few investment choices such as; broad-based indexed funds or stocks and treasury inflation protected securities with a guaranteed rate of return. By the way, if this is good for our government, shouldnt it be just as good for us? These accounts could be administered through the Social Security Administration since the system already accounts for virtually every American worker. The administrative costs of establishing supplemental personalized accounts within the current Social Security system would be minimal. Workers monies could be invested in the same things our government finds attractive and secure. The difference is noticeably clear; these are free from access through the General fund and the pillage of Congress thus, guaranteeing their existence in the future along with the accumulated interest being owned by each recipient. I might add this consideration for one to ponder; the City of Galveston Texas has had a program such as this in place since 1982. Here, the average recipient earning $51,000 a year will receive approximately $4,000 a month as compared to the comparable amount of $1,500 one would receive with Social Security. Even in the country of Chili, 10 percent of a persons money can be voluntarily invested with surprising results. Initially, only a limited few, 25 percent chose to participate in the new program. As of this writing, nearly everyone (95 percent) wants to be included seeing the benefits and desiring to prosper along with their fellow citizens. No longer should this debate be relegated to just considering the figures presented on paper because the money does not exist! Benefit obligations are paid to recipients from the taxes collected in that fiscal year. This is also known as hand to mouth. In all the years I can remember, we have never had an honest debate about this problem even when Presidents Carter, Reagan, Bush and Clinton each proposed remedies in an effort towards establishing solvency which were flatly rejected. In light of the information presented which Congress has access to, we citizens should be able to have an honest debate. Nevertheless, we Americans seem to have become a nation of closet welfare junkies, which helps explain why we cant. In past considerations, never has the program been portrayed for what it truly is. The main reason is that most Americans regard welfare programs as shameful so politicians have found other labels for them. Now theyre called social insurance, entitlements, deferred compensation, anything but welfare. Neither party wants to upset their base, especially the elderly voters with truthful statements but if you cant call something by its real name, you cant discuss it honestly. This is probably why the program has continually received micro adjustments rather than a real fix. We all know that welfare is the government transfer from one group to another for the benefit of those receiving. In the Social Security Program for instance, documented are the enormous disparities between the taxes paid and benefits received. For an example: Ida May Fuller, the first retiree to receive benefits in 1940, paid $24.75 and received almost a thousand times that amount totaling $22,888.92. In the 1950s and 60s, many beneficiaries received 10 or more times the amount their payroll taxes would have returned if invested in U.S. Treasury bonds and kept for retirees. Indeed, most beneficiaries who retired before 2000 have received, or will receive in the future, a surplus in benefits over what their taxes would have returned if similarly invested. Naturally the elderly dont see themselves as freeloaders as most of us dont. They think theyve earned their Social Security benefits by paying payroll taxes. Even my wife and I have had to revaluate our benefit expectations and what should reasonably be expected from the program. The monies we have already paid into the system plus interest over a period of 42 and 38 years respectively would virtually be exhausted in approximately 4-5 years based on early retirement at the reduced rate. These numbers would be doubled when considering the matching contributions of our employers. Receiving benefits for eight to ten years is the justified earned benefit with any additional amounts considered as free from the government. Of course there are some individuals who are currently drawing from the program prematurely due to a disability. This fact may be balanced by those who have already died, consequently leaving their remaining monies in the fund. The terminology of insurance was intended to mask the massive welfare payments being made. People falsely believe theyre only getting what they have paid for. That is even less true of Medicare where payroll taxes dont even cover the current costs. This mass deception may seem harmless. After all, most Social Security recipients have been responsible citizens and productive workers. Why accuse them of living on government handouts? The truth is that todays myths perpetuate unrealistic expectations and prevent honest debate. Americans regard earned benefits and welfare differently. The first is a right and the second is a privilege. In theory, welfare should serve some public purpose and not only enrich the recipients. By admitting that Social Security and Medicare are welfare, we allow relevant questions to be raised. Do all beneficiaries need their welfare? Is the cost unfair to taxpayers or burdensome to the economy? Have the conditions that originally justified the welfare changed? For Social Security they have. In 1935, people 65 and over were 6 percent of the population. Theyre now 12 percent and by 2030 are projected to be 20 percent. Most Americans can now save for their own retirement which is another reason for the consideration of Personal Investment accounts. Through these accounts, we could wean ourselves gradually from this dependency with the program becoming a more realistic joint effort. The Social Security debate ought to involve moral values and economic realities. How generous a safety net for the elderly can a decent society afford? How can changes be made without being too disruptive? Instead, the debate has focused on baffling accounting concepts such as fund solvency and unfunded liabilities. In 2004, Social Security, Medicare and Medicaid were 8 percent of the national income. Left alone, theyll reach 14.5 percent by 2030 as projected by the GAO. One last consideration is the situation in California as reported by the Federation for American Immigration Reform (FAIR).which reveals an interesting consideration. They report $1.5 billion per year is being added to the Social Security Fund through tax withholdings from illegal aliens. If a further examination of illegal alien data is considered which affects most states, this figure could possibly be projected proportionately with similar findings which presents another dilemma for the program. The obvious questions being; where is this money, why hasnt it been acknowledged or accounted for and to what degree does it affect the overall solvency and future considerations of the program? This money is not reserved to the program never having to be paid to the contributor. On these issues, we cant think straight unless we talk straight. We cant control our welfare habit unless we admit our addiction.
This information is adapted from my book Coming Home: America Returning To Its Roots which I am currently attempting to publish. Its my sincere desire for Americans to know the facts from all sides of the issue as I have presented them in context.
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