Shabby Social Security

Last week, the president's bipartisan Commission to Strengthen Social Security held an advisory meeting to discuss its newly published interim report, which addresses the current state of Social Security. The 32-page report should be required reading for every working American. \nBasically, Social Security is a dilapidated system and the interim report advises "Social Security needs structural improvement if it is to cope with the realities of an aging society." The current system can remain solvent until 2016 when it will then begin running annual cash deficits. \nBut, the problem must be remedied now because, contrary to popular belief, the government does not save or invest the money it brings in. The so-called Social Security trust fund is nothing more than a government account and does not generate assets as trust funds do in the market.\nOn the other hand, the trust fund does generate surpluses. Surpluses occur when the revenue intake through payroll taxes exceeds the level of expenditure. You ask, "Vince, why are you calling the system 'dilapidated' when we have surpluses to back us up?" The surpluses do not exist and even if they did the soon-to-retire Baby Boomers would swiftly exhaust the funds. For about the past 20 years, the Social Security trust fund has lent the surpluses to the Treasury Department who in turn uses that money to pay for the day-to-day expenses of the federal government. Your Social Security mony pays for food stamps and foreign aid among other things. Comforting, isn't it? The Treasury Department has credited the trust fund with government bonds to pay back the borrowed money. Today, these bonds are worth roughly $1 trillion but they are essentially IOU's because the only way the Treasury can make good on those debts is through further taxation. I'd bet FDR is rolling over in his grave.\nWhat is meant by "an aging society?" In 1940 the worker-to-beneficiary ratio was more than 40:1. Today that figure has shrunk to 3.4:1. This imbalance will only get stronger in the coming years. Demographically, the United States has changed and Social Security needs to change as well. The Social Security Administration is left with the following unfavorable options: 1) increase taxes, 2) cut benefits, or 3) reduce government programs. \nThe optimal solution is to privatize the Social Security system. Many claim that those receiving disability and Medicare benefits will be hurt by privatization. In reality, those receiving these benefits constitute a small minority. Currently 15.3 percent of a worker's gross salary is sent to the government in the name of Social Security, the bulk of which goes toward a person's retirement. To sustain the disability and Medicare functions of the system, only 4.6 percent of a worker's gross salary is necessary. What would you rather pay? \nTo receive back the same amount of money one has paid in to Social Security, the average worker needs to live to 91.9 years of age. According to the Center for Disease Control, the average life expectancy for the typical American is roughly 77 years. \nConclusion: the average American gets ripped off. Why not allow workers to invest in their own retirement? After all, very few people today believe they will see anything from Social Security. Many warn us of the risks people will take by investing privately and again these people carry ignorance to fact. Historically, the market has produced an average annual rate of return of 7 percent. Indeed the market is a gamble but any safe investor knows that long term investing bears little or no risk. \nPersonally, I find it most offensive that the government has deemed me incompetent and unfit to provide for my retirement. The reality is that Social Security is just another one of the government's corrupted and abused programs. The tragedy is that working Americans are paying. Economists have forecasted Social Security's dismal future for the past 20 years. Why has it taken until the 21st century to take action? In my opinion, if bureaucrats in Washington cannot act in a timely manner for the well being of their constituents they don't deserve to be trusted with control of anyone's retirement.