Not long ago the Associated Press reported that a congressional report stated that Social Security is facing a shortfall of 5.3 trillion dollars over the next 75 years. Not to worry, certain “tweaks” can be made to the system in order to stop the hemorrhaging. Namely, raising the payroll tax for social security, raising the retirement age, etc. All the usual things politicians do in an attempt to preserve a failed system.
At issue is the amount of retirees versus the amount of money in the trust fund. This year will be the first, they say, that Social Security will payout more than it can “bring in”. Only one problem with that…..
It’s all a lie.
There is no money in the trust fund. The “fund” was raided by the federal government, several times, and the money was used to pay for other programs, or wars, created at the tax payers expense. What is in the Social Security Budget is a lot of government bonds. Which is exactly the same as ripping money out of your purse or wallet, and leaving a note that says, “IOU.” That is exactly what a “Bond” is- a statement of debt. Nothing more. The money our government says is in the system currently, is in the form of an IOU. It really is that simple. Jim Carrey and Jeff Daniels pulled this same stunt in a movie that could easily be considered a documentary of the United States Congress.
Make no mistake about it, Social Security is quite possibly the largest failure in the world and I mean that literally. After all, it is the largest government program on planet earth. Presently, it consumes nearly 25% of the entire federal budget and over 75% of Americans are forced to pay more into this Ponzi-Scheme than they are in federal income taxes. In March 2010, Social Security paid out 56 billion dollars to 53 million recipients in various amounts, and that number rises every day. Every single cent of it borrowed, on loan, and with future American taxpayers used as collateral.
It is a model that is as unsustainable as it gets- government forcing the older generations to borrow against the future of the younger generations for the sake of a mandated retirement. The current generation already entering retirement age is the largest middle class the world has ever seen. As the baby boomers continue their path into retirement, the scales continue to tip. Current projections stipulate that the amount of recipients of Social Security will exceed 122 million people by the year 2037. That’s roughly 1/4 of the current population of the United States. All drawing “benefits” from a “trust fund” that has absolutely no money in it.
The federal government solutions are predictable. But are they right? Obviously not and congress knows that, which is why they won’t address them during the 2010 election cycle. Debating social benefits is a touchy subject during elections time. Especially when preserving those benefits requires increasing taxes on a population that is becoming increasingly poor. Which leads to the other issue……unemployment.
Not long ago I saw a headline that looked like someone ripped it straight out of the pages of George Orwell’s 1984. Forbes.com ran with a headline claiming that more people were employed despite the unemployment rate increase. Don’t bother wrapping your head around that. Either up equals down, or Steve Forbes needs to fire his idiotic editor. The point I am trying to make here is that regardless of moronic headlines, without a substantial number of employed people, the number of payers into the Social Security pot becomes much smaller. A government entitlement program operating on borrowed money will have to borrow much more money as the workforce continues to dwindle because the amount of payroll taxes will continue to decrease.
But this is merely a part of the problem. The other issue at hand is rising inflation. Although Social Security payouts are supposed to keep pace with inflation, in reality it does not. This is because the federal government measures inflation by way of the Consumer Price Index(CPI). Simply pointing to the CPI is not a real measure of anything other than the cost of products made in China, because the CPI does not include the cost of food, or the cost of energy- two things the recipients of Social Security purchase the most. Really, how many retirees dependent on Social Security do you see blowing their monthly check on iPads and other useless gadgets?
This is the real problem with this particular entitlement program. It is funded entirely by debt, there are not enough workers to pay it off, and borrowing money to continue the charade only decreases the value of the dollar further, which causes price inflation, which leads to higher food costs, which ultimately leads to a massive crisis for those dependent on that monthly check. When the cost of food and energy increase, but the benefit payout does not because of the way inflation is calculated, people start to starve. Of course before that happens someone on capitol hill will need some extra votes, and they will promise to raise the payout, which in turn will result in higher taxes, more borrowing, and higher inflation, completely exacerbating the problem.
I’m sure everyone in D.C. has some great idea on how to fix this. That idea is probably loaded with catch phrases, buzz words, and a slogan or two that will make anyone that opposes it feel guilty for “throwing the needy under a bus” or something to that effect. Watch for it, becuase it will happen. The Democrats will propose cutting a little here and there, and increasing payroll taxes to cover the cost. I’m sure there will be more to it, but essentially, that is what they’ll try to do. Then the Republicans will decry that idea, saying that higher taxes is not the answer, and that the government should just “privatize” Social Security. It is, as always, a dog and pony show as both ideas will do the same thing.
If the government attempts to fix it on it’s own, you will get higher taxes and more inflation. If the government attempts to harness the power of the marketplace by subsidizing a private company to manage it, you will get higher taxes and more inflation. Same package, different wrapper.
Welcome to 1984
Between Social Security and medicare, the entire federal budget will be utterly consumed by entitlements in just a few decades. Is it really worth it to bankrupt every generation that follows this one for the sake of saving this sinking ship? Borrowing money and indebting the nation to foreign governments just to fund a retirement program does nothing for the future financial security of later generations. What really is the point of having a program like this at all?
A family of four making 40k a year loses nearly 300 dollars monthly to this entitlement program. That’s money that could be used by that family to invest in their own retirement program, pay down debts, start a college fund for the kids, or purchase groceries. Not mention what an additional 300 dollars monthly (3600 dollars yearly) could do for personal savings, something badly needed across the board in this country. Quality of life would improve for most people, and no one would have to get thrown under a bus. You could phase it out gradually, starting with an option to “opt out” of paying. Opting out would mean that you would lose your ability to pull benefits from social security (thankfully) but at a least you could invest that money elsewhere. The elderly would be fine, and your children would never have to worry about the untold tens of trillions of dollars this program owes in future obligations.
One of the major complaints about this idea is that there is an inherent risk is placing your money into any private retirement account. Especially with the current climate in the global markets. I can understand that. However, if today is your birthday and you are turning 65, you would have been 19 years old in 1964. By the time you were 25, and done with college or out of the military, you would have just started your career. That would make it 1970 and during that year, the cost of one ounce of gold was $34.94. Today it is north of $1200.00. Why? Because the Government inflated the currency to pay for wars and entitlement programs that it knew full well it couldn’t afford. Which in turn, made the value of the U.S. Dollar decline making gold worth what it is today. Thus, the safest bet in the world is governmental stupidity. Rather than depending on the government to give you an uncomfortable lifeline, you should be betting against the government to give yourself an early retirement.
Discussing issues like this are never popular. Everyone wants the system changed or the the programs reformed. To “fix” social security, the options are simple. Raise the retirement age, and raise taxes across the board. Or raise the retirement age and raise taxes so the federal government can subsidize a select group of corporations (the ones that contributed the most to political campaigns obviously) to handle the retirement of all Americans.
Don’t like those options? Neither do I. That is because the problem isn’t that Social Security is bankrupt. The problem is that Social Security exists.
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