The only “positive change” that can be had is by people becoming acquainted with the hard math of the issue and seeing that they’ve been promised a very fine free lunch on the backs of the young.
That’s all that Social Security is: An inter-generational grift writ large.
There is no “trust fund.” There is no “lock box.” Social Security is a “pay-go” scheme, where current benefits being paid to retirees are paid by the taxes collected from people who are still working.
Full stop. That’s it. These pay-go schemes work OK when you have a monotonically increasing base of people “contributing” to the stream of funds being used to make payments to those collecting. But in most developed countries with these schemes (western Europe, Japan, the US), we had a “baby boom” following WWII, then we had a sudden collapse of birthrate after about 1959 to 1960 or so. The Boomers are a demographic “pig in the python” bulge, and they’ve now reached the leading edge of retirement (the first boomer is 65 this year (2011 - 1946 = 65). Right on cue, social security started paying out more than it collects last year.
There are no ways out of this demographic mathematical bind but to:
1. Increase the retirement age. When the age of 65 was chosen, that was the median life expectancy for males in the US. Translated from mathematical lingo, it meant that half of men were DEAD by the age of 65, ie, they never collected social security. If they were married and had young children, then their survivors got some money. People who can and want to continue working should be allowed to, and not “forced” out of the labor pool by Social Security or tax policy. If a guy wants to work until the day he drops, more power to him.
2. Find any way possible to decrease benefits. The government started doing that years ago when they changed the COLA adjustments that Claude Pepper and his merry band of grifters put onto Social Security. But this hasn’t been enough, and as you point out, we keep offering benefits to more and more people who haven’t earned them. We need to cut them off, and then start in on means testing, fraud prosecution, etc.
Now, I mentioned that other countries have “pay-go” schemes as well. What are they doing with their demographic time bomb that is even now exploding on them? They’re cutting benefits, raising retirement ages, etc. People don’t like it, but in these other countries, no one is under any delusion that there ever was a “trust fund” or “lock box,” that there was some expectation that they had an “account” with the social welfare scheme.
They’ve always known that their pension schemes were welfare.
No one wants to educate Americans with the hard truth. The truth is, Social Security is a demographic ponzi scheme. The truth is, there is no trust fund. The truth is, the money you paid in has already been spent on deficit spending, and now the Social Security system holds trillions of dollars in US debt, which the Social Security trustees must cash in to pay benefits.
Those are hard, non-negotiable facts.
>> Those are hard, non-negotiable facts.
Yes, and whatever the fix might involve at the systemic level, the lesson for kids of all ages at the INDIVIDUAL level is:
“don’t count on social security to fund your retirement!”
Going forward, individuals need to take *personal* responsibility for their later years. It’s a sobering proposition but frankly it’s been that way in most places for most of recorded history.
The US birthrate can’t sustain the pyramid scheme that is social security; welfare reform was passed because the highest birthrates were among people that, to put it mildly, weren’t paying into the bottom of the pyramid. As our birthrate declined, the borders had to be opened to let in more buyers at the bottom level; they were needed not just for the pyramid, but also as consumers (our unemployment rate clearly indicates they’re not needed as workers).
One simple way to increase SS revenue is to remove the cap on which people pay; I’m not sure what the current cap is, but people that earn $1 million only pay in as much as someone earning $105K.
“There are no ways out of this demographic mathematical bind...”
There’s a third way out - sell off all federal assets. Sell the national parks, the national forests, wilderness, swamps (wetlands) and grazing land. These assets are worth trillions.
As people hit 65 they’re given a check for what they paid in, paid for by selling these assets over a 40 year period. Then recepients get no more. Young people stop paying SS benefits now. SS ends in 40 years.
Excellent post - written in the style of Denninger. Is that you, Karl, writing under another name? LOL
Unfortunately, you, like Karl, while providing outstanding fundamental analysis, typically fail to address the real issue. Oh, you touched on it briefly, as I highlighted above, but only as an introduction to other points you're attempting to make.
Once you understand the 'math', perhaps it's time to focus on the 'reason'. For example, why is it that no one wants to educate Americans about the truth? Who benefits? Let there be no doubt, but some are making fortunes over very purposeful control.
Follow the money.