That is mine as well. But, Congress in its inimitable wisdom, not wanting to be accused of stealing, had Treasury issued 'non-negotiable' bonds for each amount of surplus that they confiscated. My Representative, Doc Hastings, admitted in a letter my wife received that Congress used the surpluses to reduce the spending debt each and every year.
P.S. You all know what a 'non-negotiable' bond is worth? Nothing!!!!!!!!!
There is no way we can eventually pay our social security obligations without considering some sort of privatization scheme.
Bush wanted to propose this early on in his second term but could not do it because his political capital was spent on Iraq and he had little or no support from his own party ( at that time, the economy was booming and nobody felt any sense of urgency).
The country of Chile realized this problem over 25 years ago.
They knew then that cosmetic changes—increasing the retirement age, increasing taxes—would not be enough. Chile understood that the pay-as-you-go system had a fundamental flaw, one rooted in a false conception of how human beings behave. That flaw was lack of a link between what people put into their pension program and what they take out. In a government system, contributions and benefits are unrelated because they are defined politically, by the power of pressure groups.
So they decided to go in the other direction, to link benefits to contributions. The money that a worker pays into the system goes into an account that is owned by the worker. They called the idea a “capitalization scheme.”
So, they decided that the minimum contribution should be 10 percent of wages. But workers may contribute up to 20 percent. The money contributed is deducted from the worker’s taxable income. The money is invested by a private institution, and the returns are untaxed. By the time a worker reaches retirement age—65 for men, 60 for women—a sizable sum of capital has accumulated in the account. At retirement the worker transforms that lump sum into an annuity with an insurance company. He can shop among different insurance companies to find the plan that best suits his personal and family situation. (He pays taxes when the money is withdrawn but usually at a lower rate than he would have paid when he was working.)
A worker can contribute more than 10 percent if he wants a higher pension or if he wants to retire early. Individuals have different preferences: some want to work until they are 85; others want to go fishing at 55, or 50, or 45, if they can. The uniform pay-as-you-go social security system does not recognize differences in individual preferences. In my country, those differences had led to pressure on the congress to legislate different retirement ages for different groups. As a result, we had a discriminatory retirement-age system. Blue-collar workers could retire at 65; white-collar workers could retire more or less at 55; bank employees could retire after 25 years of work; and the most powerful group of all, those who make the laws, the congressmen, were able to retire after 15 years of work.
Under Chile’s system, you don’t have to pressure anyone. If you want to retire at 55, you go to one of the pension-fund companies and sit in front of a user-friendly computer. It asks you at what age you want to retire. Say You answer 55. The computer then does some calculations and says that you must contribute 12.1 percent of your income to carry out your plan. You then go back to your employer and instruct him to deduct the appropriate amount. Workers thus translate their personal preferences into tailored pension plans. If a worker’s pension savings are not enough at the legal retirement age, the government makes up the difference from general tax revenue.
The system is managed by competitive private companies called AFPs (from the Spanish for pension fund administrators). Each AFP operates the equivalent of a mutual fund that invests in stocks, bonds, and government debt. The AFP is separate from the mutual fund; so if the AFP goes bankrupt, the assets of the mutual fund—that is, workers’ investments—are not affected. The regulatory board takes over the fund and asks the workers to change to another AFP. Not a dime of the workers’ money is touched in the process. Workers are free to change from one AFP to another. That creates competition among the companies to provide a higher return on investment and better customer service, or to charge lower commissions.
Chile’s government began by assuring every retired worker that the state would guarantee his pension; he had absolutely nothing to fear from the change.
Pension reform should not damage those who have contributed all their lives. If that takes a constitutional amendment, so be it.
Second, the workers already in the workforce, who had contributed to the state system, were given the option of staying in the system even though they thought its future was problematic. Those who moved to the new system received what we call a “recognition bond,” which acknowledges their contributions to the old system. When those workers retire, the government will cash the bonds.
New workers have to go into the new private system because the old system is bankrupt. Thus, the old system will inevitably die on the day that the last person who entered that system passes away. On that day the government will have no pension system whatsoever. The private system is not a complementary system; it is a replacement that they believe is more efficient.
Needless to say, the transition, after 25 years of looking back at it, can be called a success. Their system is SOLVENT.