Social Security, an American Addiction
I’ve been away from the blog-o-sphere for a while, so I’ll be sure and make this one a good rant.
America. Home of the brave. Land of the free. Land of the free lunch?
Since the 1930s America has been the land of the free lunch. Well, what do I mean? I’m talking about the current system that is more socialist and destructive than most people realize...social security.
That’s right; I said it…Social Security! Somehow I feel I’m talking about Uncle Joe’s drug addiction at the family reunion, bringing out these deep, dark family secrets. Hush, SHH! We don’t want to deal with it, so don’t speak of it! But until we talk about the issue, it will never be resolved.
The original intent of the system was, of course, highly laudable. Americans were facing the difficult chapter of their history known as the Great Depression. Poverty abounded. Millions of hard working Americans, caught off-guard, faced starvation and death, and were unable to continue providing for their families as they had in the past. Roosevelt rightly signed into law the current system whereby federal aid would be given to these impoverished people. An incredible bit of hand waving and number-magic ensued to come up with the funds, creating a scheme whereby current contributions towards retirement were immediately funneled out as benefits. Ingeniously devised, this system allowed a system to begin with no immediate funds, paying out as if it had been in existence for a lifetime.
This original scheme, (I’m not being derogatory towards the current system by calling it a scheme) is now plagued with problems. How many and their gravity depends solely on who you ask. Some claim that the system is fine, and will keep magically churning out checks from now till kingdom come. Others are the opposite, claiming the system will be defunct in a matter of years. What do I think? Well, I’m glad you asked.
Since I first learned of the social security system, I immediately had my doubts. It always seemed to me wholly necessary and wholly unnecessary. It is an unfortunate fact that many people simply cannot plan for their futures as they should. Some sort of forced retirement investment is obviously needed. But what we’ve ended up with is a severely socialistic system. In a traditional retirement account, say a 401k, you get out what pay in (assuming of course, you have managed it in such a fashion as to have a rate of return exceeding inflation, or a positive real-rate of return). It is your money, your account. When you die, it is up to you, or your will, where the money goes. Not so with social security. Here, your money is tossed into the communal pot where it is handed to someone else. When you retire, you just hope that the youngsters are as considerate as you were! (Perhaps this is why the AARP is so dead set against changing the system? They paid in, so should you!)
So that doesn’t seem to make much sense, but what seems equally nonsensical is the governmental practice that has ensued with the development of surplus from the system. At first, nearly all of social security funds went to beneficiaries. Later, however, the contributions exceeded the payouts, creating a surplus. Great right? That’s exactly what the US government said, as it began borrowing the money in forms of US Treasury bonds. Wait a minute, wait a minute…are you telling me that social security dollars are all ready “invested”? The answer is, of course, yes and no. The surplus or “communal pot” is invested in bonds while the current benefits are paid out directly in cash from the current contributions. My big concern here is not that the surplus dollars are invested, but rather where they are invested. When there is no longer a social security surplus, what will the government do? Well, the social security administration will have to start cashing in those Treasury Bonds, which means the government will have to come up with the funds….from….
You guessed it, increased taxes. Or budget cuts. Take your pick. Uncle Sam’s left hand is out and his right hand has got to pay up. Good thing he’s digging in his pocket, or eh, no wait, that’s YOUR pocket. So those people not withdrawing benefits at that time will have the pleasure of contributing to the system twice. I’m sure glad that will probably be me paying up! (Note sarcasm)
So the system is in trouble, I believe. No doubt in my mind. In fact, although I feel there will still be SOMETHING there when I retire, I am not currently giving much weight to what those benefits will be. I’m planning for my retirement without the aid of social security and until the system is fixed, so should you.
But that’s the real problem, isn’t it? Too many people are dependent on social security. Like a narcotic that is great for pain at the hospital but later causes a destructive addiction, the social security system was wonderful at its original intent but has now lead to an incredible dependency by millions of Americans. Maybe we should just phase out the system entirely. Rehab is for quitters, of course, so what we have instead is phasing out that communal pot with a more real, tangible, hands-on approach to retirement.
Private accounts are what I’m talking about and I like them for a variety of reasons. Ownership and responsibility is a big one. Having ownership of your account will perhaps wean people away from their dependency on the government. People will no longer say, “Oh look, some money is gone out of my check.” And “One day, the government will take care of my needs”. Instead they will be saying, “Money is gone from my check, but this system is clearly not enough to support me in retirement. I should supplement it with some alternative savings such as IRAs and 401ks.” (Maybe this is far reaching but shows my point)
This, to me, is the biggest benefit to private accounts. We would essentially be ending this welfare program known as social security and replacing it with an actual retirement plan and fund. But it’s a logistical nightmare, and old habits die hard. What we shouldn’t do is immediately right it off, like the AARP and Democrats have done. Are they serious? “We won’t talk about any of our ideas until you do what we want. We’re just going to sit here and say your ideas are bad until you give up on private accounts. However everything IS on the table…” Hello? This seems to be absurd political maneuvering at its extreme. But I digress.
Do I have the answer? No. Do you have the answer? Probably not. But what we should do is try to find some middle ground consensus and break the cycle of addiction that Americans know as social security. Private accounts belong on the table as well as any other option.
America. Home of the brave. Land of the free. Land of the free lunch?
Since the 1930s America has been the land of the free lunch. Well, what do I mean? I’m talking about the current system that is more socialist and destructive than most people realize...social security.
That’s right; I said it…Social Security! Somehow I feel I’m talking about Uncle Joe’s drug addiction at the family reunion, bringing out these deep, dark family secrets. Hush, SHH! We don’t want to deal with it, so don’t speak of it! But until we talk about the issue, it will never be resolved.
The original intent of the system was, of course, highly laudable. Americans were facing the difficult chapter of their history known as the Great Depression. Poverty abounded. Millions of hard working Americans, caught off-guard, faced starvation and death, and were unable to continue providing for their families as they had in the past. Roosevelt rightly signed into law the current system whereby federal aid would be given to these impoverished people. An incredible bit of hand waving and number-magic ensued to come up with the funds, creating a scheme whereby current contributions towards retirement were immediately funneled out as benefits. Ingeniously devised, this system allowed a system to begin with no immediate funds, paying out as if it had been in existence for a lifetime.
This original scheme, (I’m not being derogatory towards the current system by calling it a scheme) is now plagued with problems. How many and their gravity depends solely on who you ask. Some claim that the system is fine, and will keep magically churning out checks from now till kingdom come. Others are the opposite, claiming the system will be defunct in a matter of years. What do I think? Well, I’m glad you asked.
Since I first learned of the social security system, I immediately had my doubts. It always seemed to me wholly necessary and wholly unnecessary. It is an unfortunate fact that many people simply cannot plan for their futures as they should. Some sort of forced retirement investment is obviously needed. But what we’ve ended up with is a severely socialistic system. In a traditional retirement account, say a 401k, you get out what pay in (assuming of course, you have managed it in such a fashion as to have a rate of return exceeding inflation, or a positive real-rate of return). It is your money, your account. When you die, it is up to you, or your will, where the money goes. Not so with social security. Here, your money is tossed into the communal pot where it is handed to someone else. When you retire, you just hope that the youngsters are as considerate as you were! (Perhaps this is why the AARP is so dead set against changing the system? They paid in, so should you!)
So that doesn’t seem to make much sense, but what seems equally nonsensical is the governmental practice that has ensued with the development of surplus from the system. At first, nearly all of social security funds went to beneficiaries. Later, however, the contributions exceeded the payouts, creating a surplus. Great right? That’s exactly what the US government said, as it began borrowing the money in forms of US Treasury bonds. Wait a minute, wait a minute…are you telling me that social security dollars are all ready “invested”? The answer is, of course, yes and no. The surplus or “communal pot” is invested in bonds while the current benefits are paid out directly in cash from the current contributions. My big concern here is not that the surplus dollars are invested, but rather where they are invested. When there is no longer a social security surplus, what will the government do? Well, the social security administration will have to start cashing in those Treasury Bonds, which means the government will have to come up with the funds….from….
You guessed it, increased taxes. Or budget cuts. Take your pick. Uncle Sam’s left hand is out and his right hand has got to pay up. Good thing he’s digging in his pocket, or eh, no wait, that’s YOUR pocket. So those people not withdrawing benefits at that time will have the pleasure of contributing to the system twice. I’m sure glad that will probably be me paying up! (Note sarcasm)
So the system is in trouble, I believe. No doubt in my mind. In fact, although I feel there will still be SOMETHING there when I retire, I am not currently giving much weight to what those benefits will be. I’m planning for my retirement without the aid of social security and until the system is fixed, so should you.
But that’s the real problem, isn’t it? Too many people are dependent on social security. Like a narcotic that is great for pain at the hospital but later causes a destructive addiction, the social security system was wonderful at its original intent but has now lead to an incredible dependency by millions of Americans. Maybe we should just phase out the system entirely. Rehab is for quitters, of course, so what we have instead is phasing out that communal pot with a more real, tangible, hands-on approach to retirement.
Private accounts are what I’m talking about and I like them for a variety of reasons. Ownership and responsibility is a big one. Having ownership of your account will perhaps wean people away from their dependency on the government. People will no longer say, “Oh look, some money is gone out of my check.” And “One day, the government will take care of my needs”. Instead they will be saying, “Money is gone from my check, but this system is clearly not enough to support me in retirement. I should supplement it with some alternative savings such as IRAs and 401ks.” (Maybe this is far reaching but shows my point)
This, to me, is the biggest benefit to private accounts. We would essentially be ending this welfare program known as social security and replacing it with an actual retirement plan and fund. But it’s a logistical nightmare, and old habits die hard. What we shouldn’t do is immediately right it off, like the AARP and Democrats have done. Are they serious? “We won’t talk about any of our ideas until you do what we want. We’re just going to sit here and say your ideas are bad until you give up on private accounts. However everything IS on the table…” Hello? This seems to be absurd political maneuvering at its extreme. But I digress.
Do I have the answer? No. Do you have the answer? Probably not. But what we should do is try to find some middle ground consensus and break the cycle of addiction that Americans know as social security. Private accounts belong on the table as well as any other option.
posted by Cogito at 5:18 PM
3 comments
