Posted on 12/02/2004 4:47:36 PM PST by etradervic
Most Americans believe that the problem with Social Security is that Government is pilfering annual surpluses from the Social Security Trust Fund. They are only partially right. While it is true that the Government is financially injuring Americans through mismanagement of a poorly designed Federal program, there is no Social Security Trust Fund to pilfer. An amendment to Social Security in 1939, introduced the language of a Trust Fund. However, a true Trust Fund was never established by Congress. Americans have no legal claim to any assets in consideration of their years of supposed investment in Social Security. In fact, there are no assets per se.
In 2003, the Social Security program collected $544 billion and distributed $408 billion. The excess was consumed by the normal exercise of Federal budgetary machinations. The Treasury writes debt against this expended surplus leaving the alleged investor with an account stocked with debt which, at the end of 2003, had risen to $1.36 trillion. If the debt were against another legal entity that supplied a reasonable rate of return, it would be a more acceptable, if not desirable, arrangement. However, the debt being issued is payable by the same taxpayers that are investing into the program! The interest that is due on this debt is paid - you guessed it - by the Government issuing more debt for which the taxpayer is again privileged to be liable.
To make matters worse, the regressive nature of Social Security taxation impairs those who it should be helping the most. The 12.4% FICA tax on the first $87,900 of income (as of 2004) is a heavy burden on middle and lower income households and diverts important funds that these taxpayers need for saving and investing in their own retirements. The use of language such as Trust Fund, Board of Trustees, Lockbox, and the deceptive requirement of an $87,900 limit is a disgraceful, deliberate attempt to deceive the public about the nature of Social Security. The bottom-line is that the Social Security program is not a Trust Fund or even a retirement program but another thinly veiled Government spending program that is frittering away taxpayer wealth.
There is a strong indication of a pyramid scheme in the Social Security design. It is dependent on a future, growing number of contributors. This profligate folly may have continued into perpetuity if not for an impending demographic crisis. The aging population will augur a heavier, perhaps unbearable, burden. The depleted ranks of the younger generations, due to lower fertility rates, are required to support their more relatively numerous predecessors who are living longer. With less people paying into the Social Security sink-hole and more people collecting, the pyramid crumbles.
The Social Security spending program is long overdue to be modernized and restructured. Taxpayers who pay so dearly are entitled to separate accounts for their investment which should consist of tangible assets of which they will have a legal claim. The so-called Board of Trustees forecast that at the current confiscatory rate of Social Security taxation, annual Social Security cost will exceed Social Security tax inflows by 2018.
There is currently, however, a substantial, although diminishing, surplus that should be utilized to fund this Social Security ownership endeavor. There are effective private investment alternatives that can be leveraged to manage Social Security funds thereby eliminating the need for the establishment of another costly and ineffective administrative bureaucracy. Considerable amount of time will be required to phase out the existing system in order to support the current retirement generation. After time, the accumulation of debt in the Social Security system would be eliminated. Everyday that the Government can squander what is currently an annual Social Security surplus is an opportunity lost.
Changing to private accounts will only "cost" in the sense that paying off credit cards "costs". The reality is that the money was spent a long time ago; the only question is whether to pay it off now, or wait for it to get more out of hand first. If someone has credit card debt that's spiralling out of control, various plans to increase their credit limits without changing spending habits aren't going to have any ultimately useful effect; they'll just make the inevitable meltdown even bigger than it would otherwise have been.
If the government begins work soon on Social Security, it can probably avoid ripping anyone off too much worse than they already are. But it's important that people understand the issue isn't whether the government should "spend" money fixing it, but rather whether the government should pay the money it's already spent.
1- SS was started with an inherent swindle built in-- the retirement age was 65 when the average lifespan was 63 years.
2- It is a swindle on an actuarial and demographic basis-- when it started, about 240 workers supported one retiree.
Currently, about 2.4 workers support each retired person, and this has always trended in a down direction. When unity is reached, the system will be unsustainable- nobody is going to work half their life for a non-relative.
Similar to this, I read somewhere a few years ago that the average Social Security receipient receives everything he paid into the program in about 4 1/2 years after retirement. Everything after that is gravy, "income transfer."
There is in fact no way for a society as a whole to save money. Almost everything that is produced every year is consumed every year.
Individuals can save money. But if all the individuals in society saved money, the money by itself would not solve the problem. What you need is lot of young workers producing goods and services. If older people had all the capital, the interest and dividends paid to them would be just as much a charge on the working population as social security taxes would be.
take about 20 million illegal immigrants off social security and it might be solvent
Maybe we can start deducting Social Security from the workers in China and Mexico to close the gap.
How exactly do illegal immigrants receive Social Security?
the way I undertand it, you can immigrate here at age 63
and work for a year or two , then retire on sosh security.
nice system.
I believe I'll see my "return" on my mandatory, gubmint confiscated "investment" right after I pigs fly and
Michael Moore wins the Olympic decathalon.
Actually, the Trustees of OASDI (Old Age, Survivors and Disability Insurance) do just that every year on April 1. You could look it up.
Shrinking populations will also impact the split of income between capital and labor. Capital would be plentiful, labor scarce. So the older people would have to take lower dividends in order to pay the workers.
You are right, but if you're legalized, you can straighten it out. I know an illegal immigrant from Norway who did this.
You do know that Social Security payments are based on how long you work.
Looked at statically, on a current account basis, that is true. Every dollar paid in dividends to a retiree is a dollar generated somewhere by a worker.
But on a longitudinal, dynamic analysis, the picture is far different. Social security is "pay as you go". It is as if every retiree was allowed to mug a worker every 8 weeks and steal his pay packet. One gains, the other loses.
But an investment-based scheme doesn't work that way. The retiree saved money out of his own pay packet. That money went to build a school, which educates people, so they earn more. Or a factory, which employs people, so they create more goods and services. And it is out of this surplus that the dividends are paid.
So in a capitalist economy (which I freely grant we don't have), the money that is paid to retirees is paid entirely out of the additional wealth that their investment made possible. And most of that wealth goes, not to the retiree, but to the current worker. It is a win-win situation.
"Social Security payments are based on how long you work."
I know, but it doesn't seem right to come here for a year
and get anything other than a chance.
My mom died at age 45 and the money she "invested" since age 13 went back in the pool to redistribute, rather
than to her heirs. That includes to the people who just
got off the boat a year ago.
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