A 21st Century Contract With America, Item # 2: Re-purpose Social Security

Let me start this blog entry out with this statement:


As a society we are all the time making commitments for each other. In a representative government the congressmen and senators we elect (hire) represent the interests of each of us. Their job is a tough one. They must try to find a way to balance the wants and desires of their constituents with the wants and desires of the constituents of other representatives. At the end of the legislative process we are responsible to each other for our “shared” commitments.

When you get a few hundred of these politicians together representing three hundred million people you can start to understand how political it becomes to manage unlimited desires against limited resources and then to manage the commitments that the governing process creates.

For our generation, one one of the biggest issues facing us is the solvency of the Social Security program. Social Security has undergone great changes since its inception in 1935. As America has grown, so has the Social Security program. During my research on the program I believe that the initial goal of the program was for it to be an “insurance” program for the elderly who did not have a means to either support themselves or be supported by their family when they became to old to work. However, as the demographics of the country has changed and grown older, politicians have used Social Security as a means to gain power. Therefore, I think that instead of being a program that would provide a safety net for our elders it has become a defacto retirement plan or supplemental retirement plan for a majority of retiring Americans.

The problem with this approach is…

  1. The plan was never structured to provide sole retirement benefits to retirees for as long as retirees are living now. There are more retirees living longer than in previous generations.
  2. The plan has not adjusted properly to take into consideration of the changing demographics of the country. Over the next twenty years their will be a large amount of “baby boomer’s” retiring which will overload the existing Social Security reserves until the program can not continue in its current form.
  3. The plan is administered by the government. Unfortunately, our government has miserably FAILED at being good stewards of our money.

How SOCIAL SECURITY is suppose to work.

  1. Employee signs up for the program.
  2. Employee pays in 7.65 percent of their gross pay check into the Social Security program.
  3. Employer matches employees contribution of 7.65 percent into the Social Security program.
  4. The combined 15.3 percent is placed into a “TRUST FUND” that earns interest and is  available to each participant when they retire.
  5. Employee retires and begins to receive monthly re-payments (benefits).

How SOCIAL SECURITY really works!

  1. Employee is required to be enrolled into the program at birth.
  2. Employee pays in 7.65 percent of their gross pay check into the Social Security program.
  3. Employer matches employees contribution of 7.65 percent into the Social Security program.
  4. The combined 15.3 percent cash is credited to the “TRUST FUND” that earns interest.
  5. The Federal Government (the United States House of Representatives, Senate and President) borrows this 15.3 percent of cash from the “TRUST FUND” to finance other budget initiatives. These borrowed funds currently exceed two trillion dollars.
  6. The Social Security Administration cashes in just enough government bonds (I owe You from the Federal Government) to fund the monthly re-payments (benefits).
  7. Retirees receive monthly re-payments.

Notice step number five? OUR GOVERNMENT is borrowing from us to finance “budget initiatives.”

STOP – re-read that statement. There is no way of truly comprehending the stupidity of this behavior. WE ARE BORROWING FROM OURSELVES to pay our retirees.

Even if you discount this borrowing practice, Social Security has other problems. In the OASDI 2006 Trustee Report somewhere around 2017 the Trust Fund will start to pay out more in re-payments (benefits) than it is taking in in receipts. Without modification eventually there will not be enough income into the Trust Fund to pay all participants their re-payments (benefits). THE SOCIAL SECURITY PROGRAM IS PLAINLY IN TROUBLE.

What I find menacing is that politicians truly understand this fact, but really do not want to change the system right now. For current politicians it is not in their interest to try to fix the problem as they will not be around when the proverbial crap hits the fan. Additionally, this is because the current retirees are organized and vote in masses to dictate to the politicians to not make any changes. And here is where I have a problem on a fundamental level.

To the generations before me I apologize for what I am about to say. As I said in my opening statement I believe that “I SHOULD HONOR MY COMMITMENTS.” However, I did not make a commitment to pay 7.65 percent of MY income over the course of 51 years with no prospect of ever collecting any return (I started working and paying into the system when I was 16 and I hope to stay around past the age of 67 when I can start receiving re-payments). Additionally, it makes me so mad to think that if I were to die before collecting one penny of the contributions I made I could not will any of those contributions to my family. You see, YOU DON’T OWN ANY OF THE FUNDS YOU PAY INTO THE Trust Fund!

My parents and grand parent’s generations made a lot of sacrifices for me and my generation. And for those sacrifices I am grateful.

BUT, I am sorry that the politicians YOU elected have LIED to you for years and years and years. They have stolen your money from you and squandered it all so they could stay in office (power). You must bear the responsibility for the situation we are in, yet I WILL BEAR THE COSTS. You can choose to either help me and my generation fix the problem or you can take what you need now and when you are DEAD AND GONE we will be here left to deal with the aftermath. I will continue to honor you and your accomplishments as I live a poorer life style due to some of your failings.

Did I piss you off? Did I make you mad? Well, for that I am not sorry. I realized two years ago that this is indeed a terrible problem facing ALL OF US. I realized that I will never see any portion of that 15.3 percent that is being paid to the Social Security Administration for my benefit in my retirement. I realized that I ALONE AM RESPONSIBLE FOR MY RETIREMENT.

Maybe it is too late for you. My sweet mother and my father need the benefits they are receiving today. So I guess at least someone I know and love will get the money that me and my three siblings are paying into the UN-Trusted fund each year.

For me it is not too late. I am aggressively saving in my 401K and other investments. I still have a good twenty five years to save money for my retirement. But for the baby boomers I feel sorry. In ten years if nothing changes this country will have a significant crisis on our hands and their lot in life will change significantly. We will have to learn how to really take care of our parents and grand parents once again like our ancestors did prior to 1935.

As dire of a situation this is going to be, I think we can salvage this situation if we really want to. It will not be easy and it will mean that people will have to work and trust each other once again. And it will mean that everyone will have to compromise and make sacrifices once again for the greater good of the country.

The second item of A 21st Century Contract With America is as follows:

I, _________________ (insert politicians name) promise to work relentlessly to pass the Social Security TRULY SECURED Act. This act will 1) Forbid the Government of the United States from borrowing Social Security Trust Funds unless there is a national emergency; 2) Will provide for a means for the currently borrowed funds to be paid back to the Social Security Trust Fund within ten years of the enactment of this law; 3) Will limit the scope of Social Security going forward so that it will only provide benefits to a participant to maintain participants at only the national poverty line of economic existence and 4) Will provide a means to privatize each individual’s contributions so that those funds are owned by the individual contributor.

If I can not bring forth such legislation within two years of my first day of office, I agree to resign my political office immediately at the end of the two years.

History of Social Security – From the social security administration website.
OASDI 2006 Trustee Report – The 2006 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

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Filed under All Posts, Politics, Social Security

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