Posted on 03/02/2004 1:23:11 PM PST by Mike Bates
Federal Reserve Chairman Alan Greenspan went to Capitol Hill last week and made a colossal blunder. He told the truth about Social Security.
He was right, naturally. The country can’t afford to pay soon-to-be-eligible baby boomers the current level of benefits.
Several members of Congress were shocked, absolutely shocked, that Mr. Greenspan would say anything so reckless. They must not read the Social Security statement that’s mailed annually to workers. This year, there’s a message from the program’s Commissioner that notes:
"Without changes, by 2042 the Social Security Trust Fund will be exhausted . . . At that point, there will be enough money to pay only about 73 cents for each dollar of scheduled benefits."
Fortunately for Mr. Greenspan, he doesn’t have to run for reelection. If he did, he’d be out of office quicker than Howard Dean can scream that he’ll campaign in South Carolina, Oklahoma, Arizona, North Dakota, New Mexico, California, Texas, New York and, well, you remember the rest.
Social Security has long been, as advertised, the third rail of American politics. Barry Goldwater learned that 40 years ago. He pointed out that the system was actuarially unsound and contributions to it weren’t set aside to pay benefits, but used to fund other government operations.
For his efforts, he was portrayed as a heartless wretch wanting to kick old people out into the snow and force them to eat dog food.
Senator Goldwater also disliked that Social Security was compulsory. Of course it is. If it were not, so many people would opt out of it that the thin pretense of solvency would instantly crumple.
It’s no coincidence that members of Congress and federal employees didn’t participate in Social Security until 1984. They knew a bad deal when they saw one. Public outrage eventually forced them into the system.
Some people have done quite well with Social Security. Ida May Fuller was the program’s first beneficiary. She contributed less than $25.00 into Social Security. In return, she received $22,888.92 in benefits.
Just as the system has some winners – those who take out much more than they put in – Social Security also makes some people losers. Because of differences in longevity, blacks often are shortchanged in terms of benefits.
A black male born in 1970 has, according to the government, a life expectancy of 60 years. The full retirement age for Social Security is currently 65 years and four months and going up. So if that black male dies in 2030 and leaves no dependents, he will have received nothing in return for his contributions.
Last year two very close friends of mine were widowed. Both of their spouses paid into Social Security for over 30 years. For different reasons, neither of my friends will receive one additional cent in retirement benefits despite all those thousands of dollars kicked into the system.
Few politicians have the courage to say what Social Security is and has been since its inception: An intergenerational pyramid scheme whose existence requires sucking progressively more taxes from workers. Half a century ago, about 16 workers contributed for each retiree getting a check. Now the ratio is about three to one.
Several studies have concluded that if a person were able to invest his and his employer’s Social Security deduction, retirement benefits would be lots more than what the government pays out. Generation X appears to have recognized this some time ago. In 1994, a survey of Americans aged 18 through 34 found that more than 80 percent of them believed any benefits they’ll get from Social Security will be less than what they would have received if they had saved the money themselves.
Add to this the complication that workers have no legal right to their or their employers’ contributions. Years ago the Supreme Court ruled that benefits can be reduced or even totally eliminated by Congress at any time.
Now is an excellent opportunity to really reform the system. Younger workers should be permitted to place at least part of their Social Security payroll taxes into private accounts. At the same time, benefits should not be reduced for those already retired or for workers nearing retirement.
Any fundamental change will be complicated and expensive. Addressing Social Security’s flaws with higher payroll taxes, as has already been done more than 40 times, isn’t a sensible alternative.
The real risk is in doing nothing.
I keep hearing how deprived blacks make much less than whites. It that is the case they put less into the system, no? Then if that is the case, maybe they get more out than they put in.
The people reserve the right to come out with tar pots and feather bags, regardless. I just dare you thieving b@st@rds to deny me benefits when I retire.
Furthermore, even if neither the states nor the feds were to continue the program, the question of what to do with the people who've paid into it all their lives can be answered by having the federal government sell of the trillions in federal land holdings that it's not using for any constitutional purpose.
The wage gap between white and black workers has been narrowing for a number of years now.
To which "you thieving b@st@rds" are you referring?
Uh, no, not with money that the wonderful hard-working people of America have been forced at gun-point to contribute to a bogus plan. Nope. The only "solution" is to start phasing-out ss now (divert to private investments), then print mo money to cover the upcoming MASSIVE ss and medicare payments. Will that be cash or credit card? My man, you're workin' fo' ME now. Just wait till the tax rate hits 70%.
IMHO a big part of the problem lies with the many layers of SS payouts.. i.e. Medicare (SS) for numerous disability classifications for younger than 65yr. olds.
Every public persona who comments on SS infers it's for retirees only... Well.. it's not and therin lies the real problem.
I agree. SS is sort of an insurance program, sort of a welfare program, sort of whatever pols wanted to toss in to show their "compassion."
Actually, the real problem is very simple. Social Security started by giving out money to people who never paid in. It is fundamentally impossible for any program which gives money away to people who did nothing to earn it, to to pay off "investors" as well as one which does not do so.
The true nature of Social Security is that the present generation of retirees "borrows" money from the current generation of workers, on the promise that future generations will pay it back. When anyone except government does that, it's called fraud.
If I have a private retirement fund which grows to $200,000 and then I die, my family or heirs will get $200,000. If I put $200,000 into Social Security and then I die, my family or heirs will get $255.
I wonder how many people could get by with a lot less life insurance if Social Security didn't confiscate the funds of people who died before retirement (or course, I recognize that confiscating such funds is the only way SS can appear even remotely solvent).
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