Fix Social Security Now or Later?

Posted on July 31, 2010


A few facts; social security is the old age, survivors, and disability insurance program.  In 2008 the system paid 51 million Americans $615 billion in benefits.  In 2008 $805 billion in social security taxes were collected.  The annual cost will start to exceed tax revenues in 2016 (approximately).  The current unfunded obligation over the next 75 years is $5.3 trillion (your grandkid’s problem, right?).  Currently there is a 25 tax increase and 13% benefit reduction proposed to keep the program solvent.  Significantly larger changes would be needed after 75 years (your grandkid’s problem, right?).

Nancy Pelosi is sending a message to the GOP and all of America; “You’ll kill our economic recovery if you try and fix Social Security”.  Some argue that our economic security will suffer if we don’t fix it.  Of course Pelosi says this because congress constantly raids Social Security to feed their huge spending habit.  We need to begin fixing Social Security immediately but gradually.  We do it by not forcing people that are just now entering into the work force to put into the fund.  We allow them to keep their money, tax free, and invest it themselves.

The counter-argument I’m hearing from those entitlement social program whores who just can’t get enough of spending other people’s money to make them feel better about themselves – because let’s be honest, their concern in the end isn’t actually helping others but rather to be seen as helping others – is that now just isn’t the time, it’s awful timing.  And the timing was great for passing a trillion dollar health care program that doesn’t actually provide health care?  The timing is great to try and pass an economy choking energy tax?  The timing is great to let the “Bush tax cuts” expire so all Americans will be having more of their sorely needed income – assuming they still have an income – taken from them by this spending crazed administration?  Poor timing is something Democrats are hardly concerned about so this argument is bunk.

These people want drunken sailor spending right now and they don’t want to cut any benefits we obviously can’t afford.  Have your cake and eat it too.  What in our history would indicate this is a workable solution?  If you say the New Deal during the Great Depression you know zilch about that history and should probably just keep quiet.

We know that drunken sailor spending means higher taxes down the road.  It’s a very short road.  It doesn’t have to be a drastic overhaul at this point, even some minor tweaks to the Social Security system at this time to get us into better shape you’re sending the signal that our tax burden can come down in the future.  That’ll make Americans more confident and willing to do some spending of their own.

The problem is only going to get worse.  If you talk to CEOs today you’ll find that they’re expressing a lack of confidence which is going forward and looking down that road to only see ballooning deficits.  Congress has been talking about fixing this system for decades, practically since its inception in the 30s.  There are fixes to it for our future generations but it’s all unfortunate because this will create a generational warfare between those people who are getting sweet benefits right now versus those who will be getting less in the future.

Big American businesses are sitting on a lot of cash right now, that’s a sign of a lack of confidence.  People don’t want to spend, consumer confidence is remarkably low.  This administration needs to address this by telling people they aren’t going to be paying more taxes in the near future.  In fact, we’re going to do things to decrease your tax burden.  Instead we have drunken sailor spending and we know we’re in for tax increases.

The retirement age is going to have to be raised and the benefits will need to be indexed to CPI growth not wage growth which will create a big fight because companies are telling their employees they have to retire earlier but they’re not going to get their SS benefits until later.  The danger is if you reform Social Security it’s going to put duress on Medicare because people would turn to Medicare because they don’t have that Social security benefit to help them through their daily lives.

In 2000 we had a massive financial surplus and didn’t bother to do anything about Social Security, so even in the best of times our government has shown no inclination to solving this problem.  Maybe if we did something during these bad times it would show some will and resolve and then in better times we’d stay the course?  But what are we going to do in these bad times?  People don’t have a lot of savings left and people are retiring at a later age simply because they have to keep working for the income.  How about means testing?  Some people don’t need Social Security payments yet everyone gets them.  The problem with is that it’s “our money”.  Everybody has been paying into it – well, those who work – and this money was supposed to be put into a lockbox of sorts, a fund for ourselves, and even if you’ve been fortunate to become financially wealthy it’s still “your money” and you’d like some of it back.  You were forced into paying into it after all.

We need to gradually privatize this system to eliminate it.  People should have control over their own money and their own destiny.  This control over your life must be taken away from the government.  Even President Clinton was for privatizing parts of Social Security.  We’re only talking about one to two percent of the payroll tax that’s taken in.  Even the financially ignorant could invest that money and get a better return than the microscopic treasuries the government uses now.

The Democrats made a(nother) huge mistake when they got their hands on Social Security monies in the 60s, and that was a disgrace and it was wrong.  They pried open that lockbox and poured the contents into the pork barrel.  That Social Security lockbox is full again; problem is it’s full of IOUs.  The great myth put forward by FDR and repeated loyally by every Democrat and most mainstream press since was that those monies would only be used for Social Security payments.  You were lied to yet again America.

This problem will get much worse if we’re economically stagnant but they’re solvable if we growing.  In a $14 trillion economy just two points of GDP is $280 billion.  So what we need is growth also which is what Nancy Pelosi will not talk about.