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Townhall...
The Truth about
Social Security
By Bruce Bialosky
It should be obvious to every American that our entitlement programs –
Social Security, Medicare and Medicaid – now represent the lion’s share
of the Federal budget, and are growing at an unsustainable rate.
Unfortunately, no realistic solution to this fiscal disaster has ever
been seriously evaluated by Congress. Worse, no effort has ever
been made by our leaders to honestly inform Americans of the dire
severity – and ominous consequences – of our current predicament.
Even when President Bush attempted to confront the issue of Social
Security – for which he was mercilessly demonized by Democrats and
their media partners – he never actually communicated the simple truth
to the nation. This was profoundly regrettable, principally
because strong public sentiment to reform these programs will only
occur when Americans realize the full dimension and gravity of the
dilemma that confronts us.
Occasionally, Americans are provided some facts that help explain the
problem. We know, for example, that while there used to be eleven
workers paying into the Social Security Trust Fund (SSTF) for each
beneficiary, soon there will only two. We also know that when the
program started in 1935, the average lifespan of Americans was less
than 65 years old – the designated retirement age; today, 76 years
later, we live on the average 18 years longer, to about the age of 80.
Most of the time, however, what we hear from our leaders are just
flat-out lies. Senate Majority Leader Harry Reid recently stated
in a television interview that Social Security is solvent for the next
forty years. This claim is being echoed by Jacob Lew, the
Director of the Office of Management and Budget even though he says it
is not a problem for 20 years. This is a preposterous claim that we’ve
heard before, specifically when Ronald Reagan and Tip O’Neill forged
their grand compromise in 1983. Surprisingly, the leader who came
closest to uttering the actual truth was Al Gore, when he spoke of the
Social Security lock box. But because it was the annoying Al
Gore, he was skewered in a skit on Saturday Night Live.
So here is the clear unvarnished truth that every American needs to
hear and understand: There is no money. It has all been spent,
every last dime. In fact, 2011 is a momentous year for the SSTF,
because it is the first year in which payments to beneficiaries exceed
the “contributions” from taxpayers. This year $45 billion more
will be paid to recipients than will be collected from the paychecks of
American workers. The money will come from the general tax fund – or
more accurately, borrowed from China as new government debt.
Unless the Social Security system is reformed, we will never again see
a year in which Fund income exceeds benefit payments.
Here’s another truth: From this point forward, Americans who receive
Social Security benefits have to realize who is paying those benefits
to them – their children. If they want increased benefits, they
will be taking them directly out of the paychecks of their kids. If you
don’t have working children, you are taking the money from someone
else’s kids.
You ask what happened to the money. The government (both
Democrats and Republicans) took the excess money in the SSTF and spent
it on the general needs of the government, such as defense, the EPA,
and the Interior Department. Instead of collecting more taxes,
cutting government, or borrowing the money (just like they’ve done to
create our $14 trillion debt), they just took the money from the Social
Security honey pot. Every year, our leaders would take out a
piece of paper and write “I owe you $37 billion,” or whatever was the
difference that year between what they collected in FICA taxes and what
they paid out in Social Security benefits. Americans now have a
little folder with a bunch of IOUs that are worth………zero, zilch,
nothing.
So now what can we do? One suggestion – which has been successfully
implemented in Chile – has been to have young workers put their Social
Security payments into private accounts, where they could invest the
money. The Left goes apoplectic about this because to them, the only
thing more evil than Hitler is Wall Street. Could someone
please explain how Wall Street could possibly do worse than our
government, which has left us nothing for our retirement despite all
the money we paid? Restrictions could be placed on private
accounts that would only permit investments in money market accounts,
government bonds, or AAA-rated corporate bonds. Any way you look
at it, Wall Street couldn’t do any worse than our elected officials and
the government bureaucrats who spent it and then lie to us that it
stills exists.
That debate will go on for a long time, but here are some changes that
we could enact quickly and easily to improve this disastrous situation:
1. Increase the retirement age immediately – and not over a 40-year
period (which is the current policy). By the time the retirement
age is increased by two years, our lifespan will increase by five years
-- making the whole plan silly. We need to make regular reviews
and increase the eligibility threshold every five years, if necessary.
2. Stop paying money out to people who do not need it. The
biggest stumbling block here is that Democrats refuse to stop calling
this a retirement program. We should immediately redefine Social
Security as a government benefit program – from which you only receive
money if you’re eligible. One of my CPA friends has a client who
has reached retirement age and receives Social Security, despite having
an annual income that exceeds $500,000. If we were truthful about
the program, we could tell this person “Yes, you paid in and yes, you
are not getting any benefits – sorry. Be happy you don’t need
it.” In exchange for that we would stop the continuous increases
in amounts they pay into the fund.
Another friend of mine had a client who had a child late in life and
passed away when the child was still in his teens. The child
inherited a large income (from cash-producing investments), and his
mother took over the substantial estate. Despite that, the child
started receiving Social Security benefits. That is just nonsense.
3. Stop placing ridiculous restrictions on pension plan contributions.
People need to save as much as they can for retirement, and imposing
self-righteous constraints based on income limitations is
counterproductive. If you are in a 401(k) program and other people in
your company choose not to contribute, why should your savings be
limited? We also need to raise ridiculously low contribution limits put
on various pension plans, such as $5,000 on IRAs. We need
to do whatever we can to encourage Americans to save for retirement.
Above all, we need to get the message out that you cannot count on
Social Security as your sole means of support when you are too old to
work.
That is the truth. There won’t be enough when you retire, so
you’d better start saving more now. But this is the government
and most politicians – and almost all of the media – will not tell
people the truth. Fortunately, there are a few new people in
office who are willing to confront the problems we face, and openly
discuss the difficult choices ahead. Now that you know there is
no money set aside for you, what are you going to do about it?
Read it at Townhall
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