Bad faith on Social Security

I suppose I can't blame Democrats for fighting President Bush's plan to reform Social Security. I just wish that, for the sake of the economic welfare of future generations, they'd fight fair.

So far that hasn't happened. First, Democrats pooh-poohed the idea of a "crisis" and turned a blind eye to the demographic reality that having fewer workers per retiree means a crushing tax burden on those left in the work force. They distorted the impact of the president's plan to allow younger workers to invest in private accounts. Then they came up with the wild accusation that Republicans have a secret agenda to destroy not only Social Security but the legacy of President Franklin Delano Roosevelt.

And now, they're trying to ring the bell early and declare the debate over just as it has begun. All because Democrats see an opportunity to use the Social Security issue to scare up a few votes from elderly voters in the 2006 elections.

Among those dealing in bad faith is Howard Dean. The new chairman of the Democratic National Committee calls the president's proposal a "scheme" that will saddle future generations with debt.

What chutzpah. If Dean really cared about the financial health of future generations, he'd suggest a way to reform the current system so that the workers of tomorrow aren't saddled with sky-high tax rates to keep it afloat. Now that could be a winning argument for Democrats.

But the guy who takes the cake is Rep. Charles Rangel, D-N.Y., who insists that Social Security reform is dead and that President Bush killed it.

How irresponsible. Rangel obviously doesn't care about the impending implosion of one of America's most revered entitlement programs, or what that implosion will mean to anyone born after 1960.

And how misleading. Social Security reform isn't dead. Granted, polls show that a majority of Americans are wary of the president's plan. But the same polls also show that many Americans are convinced the current system isn't built to last, and that many of them would consider other ways of fixing it.

For instance, while people don't seem to like the idea of private accounts, they are very receptive to means-testing benefits so that wealthier retirees don't help drain the system. According to a recent USA Today/CNN/Gallup Poll, two-thirds of those surveyed approved of limiting retirement benefits for the wealthy.

I'd love to know what Rangel thinks of that idea — or frankly, any proposed reform of the current system. When the New York Democrat was asked for his own ideas for saving Social Security during a recent appearance on NBC's "Meet the Press," he dodged the question and seemed to suggest that if Republicans were smart, they'd do the same.

"They can grab that third rail," Rangel told Tim Russert. "I'm not thinking about doing it unless it's done with Democrats and Republicans working together with the president."

There you go again, congressman. Rangel insists that any plan to reform Social Security must have bipartisan support, and yet he never misses an opportunity to use the issue to bludgeon Bush and other Republicans. Not exactly the best way to build bipartisanship.

Anyone who thinks this debate is over is indulging in wishful thinking. I understand why Democrats want this issue to go away. The debate puts them in the uncomfortable position of having to choose between the interests of two constituencies that they've spent decades trying to court: senior citizens and young people.

So far, the elderly have been an easy choice. Most Democrats in Congress don't have the nerve to confront the powerful senior citizens lobby — most notably the AARP with its nearly 40 million members — to force the sort of changes that a simple reading of demographic realities says must take place.

So they'd rather sell out young people who, because they don't vote in the same percentages as the elderly, are on their way to getting the short end of the stick.

Young people need to wake up and start "feeling" the Social Security debate before it's too late. They need to realize that Democrats have made their choice, and that it amounts to an assault on the long-term financial well-being of their generation. Then they need to go to the polls, maybe even run for office themselves, and fight to prevent tax rates from soaring over the next few decades.

Whenever I talk this way, skittish baby boomers write in and accuse me of promoting generational warfare. But the war has already started, and what I'm talking about is nothing more than generational self-defense.

Xer Ping

Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.

Freep mail me to be added or dropped. See my home page for details and previous articles.

If someone spends $1,000 on a credit card, and then uses another credit card to pay off the balance on the first, and a third to pay off the balance on the second, etc. all the while picking up interest charges, until the person has $10,000 of revolving debt, how much would it cost the person to stop revolving the debt and actually pay it off?

Some people would say it would cost $10,000, but that wouldn't really be true. It wouldn't cost anything. What cost the person was taking on the original debt and letting it revolve rather than repaying it. The only way to be rid of the ongoing cost of servicing the debt is to repay it. Repaying debt does impact cash flow--sometimes severely--but it is not a cost.

Social Security is based upon the premise that the government "borrows" money from current workers and uses that money to pay off current retirees. In theory, the current workers will be paid off with money "borrowed" from the next generation of workers. Unfortunately, the entire system is predictated upon the assumption that it's possible to borrow money to pay off debt. Anyone with any understanding of accounting whatsoever should know that it is fundamentally impossible to get out of debt by borrowing more money. To be sure, sometimes borrowing money to pay off debt can be useful if the new debt is on better terms than the old, but fundamentally the only way to actually get rid of debt is to pay it or go bankrupt.

George Bush wants to pay the debt previous generations have accummulated. For this he is being blasted, because others would prefer to pretend the debt does not exist.

Phase it out:
1) Workers entering the system after the date of enactment of the phase out plan do not participate in the system. They will not have SS deducted and will not receive any benefits upon retirement.
2) Workers currently in the workforce undergo a phased reduction of deductions. They will receive benefits in accordance with their years worked as of the date of enactment of the phase out plan.
3) Retirees as of the date of enactment receive current levels of benefits but there are to be no increases.
4) Phase out to occur over a 20 year period after date of enactment.
5) Etc.

Screw phasing it out. Buy it out. Give the money, in a big fat gummint check, that Social Security-age and near-SS age folks (say, up to age 50) put in, back to them. With interest--but taxable as income (which it would have been if never taken out of people's income to begin with).

Let everyone else out, with no payout at age 62 or 65 or 67. SS is OVER. End payroll taxes for SS purposes.

That is the only way to end Social Security and do so fairly. Taxes would probably have to be increased on everyone to handle that initial payout, but then, SS's final payouts would be taxable as they would be either sitting in bank accounts or pissed away on things that ARE taxed, so maybe not. Seniors take a hit in getting no interest back. Non-seniors don't get any of the stolen money back.

That and the borrowing began when the Democrats decided that it would be a splendid idea to place SS payments into the General Fund rather than funnel them into the SS fund. A long time ago, there really was a "lockbox," but that critter was eliminated so that the Guvmint could have more discrectionary capital. After that point, SS became little more than a federally sanctioned pyramid scheme. Now, people have been conned into depending solely upon SS for their retirement. Even the FDR democrats envisoned this as a supplement to whatever retirement arrangements that people made. Now, it is just one more teat on which people can suckle.

That and the borrowing began when the Democrats decided that it would be a splendid idea to place SS payments into the General Fund rather than funnel them into the SS fund.

No, the borrowing started as soon as people were told that they could expect to get anything back for the money they put in. And that happened even before the lockbox was supposedly raided.

The fundamental problem with Social Security isn't that the "trust fund" is invested in government bonds, but rather that only a small portion of the money which is "invested" goes into the trust fund. The only ways Social Security manages to maintain the illusion of generating a positive rate of return are (1) by having people pretend they only put in half of what they do, thereby getting an extra guaranteed "100%" rate of return; (2) by confiscating almost all of the contributions of people who die prior to retirement; (3) by spiralling deeper into the debt cycle.

Any accountant who tried anything like that with a private retirement firm would be in prison, and for good reason.

We can agree that you get more for your effort by simply putting cash in Mason jar and hiding it in your closet. Current retirees are receiving what, approximately 60% of what they paid into the system? It is an accounting farce. I do do better placing the same amount deducted from my pay into a simple savings account at the bank. I really learned how much we pay for SS when I worked as a self-employed consultant. Income tax was small sompared to the SS extortion.

Phase it out:

The one piece that is missing and that I assume will quickly become the only real front for the democrats to fight back on this is SS for disabled / children of disabled.

I'm not sure of the details, but social security does pay out to people who become disabled for one reason or another. In my opinion this is a safety net of the program that has value, though not necessarily within the SS program.

I would add to your list the removal of this benifit from the social security program as a whole in place of a very specifically defined and prescribed program which provides the safety net. I see no reason to mix the issues of "retirement pensions" and a real safety net.

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