Posted on 07/28/2006 2:27:39 PM PDT by Tolerance Sucks Rocks
Michael Tanner is director of health and welfare studies at the Cato Institute and editor of Social Security and Its Discontents (2005).
At a press conference with fellow Democrats at the Statehouse on Monday night, Senator Robert Menendez attacked his Republican opponent, Thomas Kean, Jr., for secretly supporting President Bush's proposal for "privatizing" Social Security. Kean denied the charge and responded with a few of his own, but in swapping barbs, neither candidate gave us the slightest clue what they would do to solve the program's looming problems.
The facts are simple: Social Security will begin running a deficit in just 11 years. Of course, in theory, the Social Security Trust Fund will pay benefits until 2040. That's not much comfort to today's 33-year olds, who will face an automatic 26 percent cut in benefits unless the program is reformed before they retire. But even that figure is misleading, because the Trust Fund contains no actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system. It says nothing about where the government will get the money to pay back those IOUs.
Even if Congress can find a way to redeem the bonds, the Trust Fund surplus will be completely exhausted by 2040. At that point, Social Security will have to rely solely on revenue from the payroll tax-but that revenue will not be sufficient to pay all promised benefits. Overall, the system's unfunded liabilities-the amount it has promised beyond what it can actually pay-now total $15.3 trillion. Yes, that's trillion with a 'T.' Setting aside some technical changes in how future obligations are calculated, that's $550 billion worse than the figures for 2005. In other words, by failing to act last year, Congress handed our children and grandchildren a bill for another $550 billion.
Moreover, Social Security taxes are already so high, relative to benefits, that Social Security has quite simply become a bad deal for younger workers, providing a low, below-market rate-of-return. In fact, many young workers will end up paying more in taxes than they receive in benefits. They will actually lose money under the program.
But the single most important problem with the current Social Security system is that workers have no ownership of their benefits. In Flemming v. Nestor, almost 50 years ago, the Supreme Court ruled that workers have no legally binding contractual or property rights to their Social Security benefits, and those benefits can be changed, cut, or even revoked at any time. This leaves workers totally dependent on the good will of 535 politicians to provide for their retirement needs. And, because workers don't own their benefits, their benefits are not inheritable. This is particularly disadvantageous for African-Americans and other groups with shorter life expectancies.
It doesn't have to be this way. Social Security reform was once a bipartisan issue. Democrats like Senators Bob Kerrey and Daniel Patrick Moynihan were outspoken in warning about the program's looming insolvency and calling for innovative approaches to fix it. The Democratic Leadership Council and its think tank arm, the Progressive Policy Institute, explored ideas, including personal accounts. Congressmen like Charlie Stenholm reached across the aisle in search of compromise. Even President Clinton led a national debate to "Save Social Security First."
But ever since President Bush called for reforming the nation's troubled retirement program, congressional Democrats have had only one answer: No. No to personal accounts. No to changes in benefits. No to offering a reform plan of their own. No to any discussion or negotiation.
At the same time, Republicans have scurried for cover -apparently in fear of offending AARP and other special interests-running from positions they know are right. The result has been a choice between Democratic obstructionism and Republican cowardice.
The options available to fix Social Security are limited. In fact, it was President Clinton who pointed out the available options: raise taxes, cut benefits, or invest privately. When one opposes personal accounts, he is obligated to tell us exactly which benefits should be cut or which taxes should be raised.
Inaction is not an option. Social Security's problems are not going to go away. The gap between its promises and what it can pay gets bigger with each passing year. The rate of return for younger workers continues to decline. And workers still have no ownership of their money.
Almost everyone agrees that Social Security reform is not going to happen this year. It's an election year, after all-no time to rock the boat. But election years also allow people to have their say. No candidates, whether Republican or Democrat, should be able to avoid telling us exactly where they stand on Social Security. Do they favor raising taxes? Do they want to cut benefits? Are they willing to give workers more choice, ownership and control over their retirement funds?
Its time for voters to ask. And it's time for candidates to answer.
This article appeared in the Newark Star-Ledger on July 27, 2006.
PING!
free dixie,sw
Too bad.
Are they willing to tell workers that the "Social Security" tax is just another tax, and that workers have ABSOLUTELY no claim to the tax that they paid into the "Social Security Trust Fund"?
Didn't think so.
Congress is NOT your friend.
Welcome to FR.
Flemming V. Nestor: [Nestor] appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling,The Supremes reject this argument and established the principle that entitlement to Social Security benefits is not [a] contractual right.
The minute the government gets it, it's theirs. You're pwn3d, baby (and so am I!).
Absoultely. The Trust Fund is a cruel joke. The only way to pay off one of the "bonds" in that filing cabinet is to take it out of tax revenue. Will an administration at that time be enlightened enough to realize that a DROP in rate will be what yields the RISE in revenue to afford the redemption?
I would love to take the money I pay in SS yearly (not that much since I am 19) and put it in my Roth IRA. Make it work for me.
Here's my option: SS opt-out. Once you do, you cannot go back. That way, the people who do not want social security when they reach retirement age can do whatever the hell the want with the money and it's on them. Smart people will invest it, stupid people will buy, buy, buy and then complain once they reach retirement age.
The only solution for Socialist Security is to dismantle the whole thing. Cease all new "contributions" paid to the government by employees and employers. Offer everyone a lump sum payment consisting of accumulate employee contributons and employer contributons, plus accrued interest. Most people under about 50 years of age would take the lump sum. This would provide $$$billions in private capital to the economy, as people invest their money. Older people would probably stay with SS, so it would take 20-30 years to completely unwind this socialist ponzi scheme.
Democrats/Socialists and fake capitalists will all say this is impossible.
That's why Socialist Insecurity should be an opt-in plan: whoever is willing to take the risk can pay the task. The rest of us will build up REAL retirement funds. );-)
Just like the gasoline situation the politicians know it is happening but refuse to do a thing about it. Bush was on the money about Social Security and this nation has known since the late seventies we had an energy problem. But the liberals in America own the Democrat Party and all they want is Controversy,Crap and Confusion while Castro is digging for oil off the Florida coast.The Democrats have refused to allow a refinery to be built in Amercia in the last 30 years and all they can do is bitch and moan while their hot air pollutes America worse than the SUV's they drive and complain about. They complain about big business while they were padding their pockets with the "Big Dig".Their spots show to all that can see but about half of America is blind and uneducated.
I'd be happy with a transition to personal retirement accounts, state control (as opposed to federal control), and conversion to an opt-in/opt-out program. I would opt out in a heartbeat (I'm 39). :-)
The only fix the Democrats can get away with without offending and alienating their base is means testing for both Social Security and Medicare with no other reform at all. Classic soak the "rich" who will turn out to be those who planned and invested in their own retirement.
I always laughed at my Bio Teacher in high school. She ran a club called the environmental awareness club. Meanwhile, she drove a jeep which had poor gas mileage.
Certain "Republicans" don't want us drilling near FL either.
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