Privatization Of Social Security

Articles

Privatization Of Social Security

By David Allen Jared
Feb. 22, 2005

In a recent column, Thomas Sowell, one of the leading intellects in the United States, said the following: "People who oppose the privatization of Social Security call it "a risky scheme." But is anything more risky than turning money over to politicians and hoping that they won't spend it before you retire? They have been spending the "trust fund" for decades." How very right he is!

http://www.townhall.com/columnists/thomassowell/ts20050222.shtml

There are still millions of Americans who believe that the Social Security "Trust Fund" is an ACTUAL "fund" containing a cash reserve as a hedge against future retirees joining the system. It is nothing of the sort. The way it works is this: Everyone pays "payroll taxes," deducted from their paychecks (or paid in by those individuals who own and run their own businesses) into a system called "FICA." Look at your next pay stub to find out how much this is. Basically, it's 6.2% of everything you earn LESS than about $90K. If you are an employee, your employer kicks in an additional 6.2% OR, if you own your own business, you must "contribute" that additional 6.2% yourself for a total of 12.4% of YOUR money that goes to support Social Security.

Now, let's look at what HAPPENS to that money sent to the U.S. Treasury. When it arrives in Washington, part of it is immediately paid out again to those drawing either Social Security retirement "benefits" OR to those who are participating in an add-on programs involving Social Security payments to kids under 18 who are "survivors" of someone who'd been paying in but died, or those of any age who've qualified for SSI payments--basically, payments to those who find themselves "disabled" and unable to work--regardless of adult age. Whatever is left over (and currently there IS a "leftover" since more people are paying in than are drawing out) is placed in something the government calls "The Social Security Trust Fund"...except, by law, the only way these excess funds can be invested as a hedge on inflation is by purchasing Treasury bills, which currently "earn" an interest rate around 2% per year. Compare that to the AVERAGE annual stock market increase in value of about 8% per year since the start of "The Great Depression"--76 years ago! So the "trust fund" is replete with T-bills; not cash.

Now comes the kicker. If you didn't know, the government sells T-bills all over the place--to American private citizens, corporate retirement funds and even to foreign businesses and governments. Guess what happens to the money received from the sale of such T-bills? It goes into the general revenues to be spent as Congress sees fit! That's right, it's considered "profit"--the selling of T-bills--to the governmental enterprise and the proceeds are used partially to fund all those cockamamie, screwball "projects" invented, mostly by House members, to help buy votes and campaign contributions from their constituents. YOUR Social Security Trust Fund helps finance government-sponsored "research" into the life- cycle of the red-spotted, web-footed ground beetle or the amount of methane gas expelled by termites or the reason some (but not all) ice is melting. (Let's see if I can help here. It's getting warmer? That'll be $10 million, please!)

The left, of course, claims that "T-Bills are the SAME as 'cash' because they are backed by the 'full faith and credit of the government,'" but that's a specious argument, at best. The government is ALREADY broke and has been for several decades--not so oddly, since about the time the government decided that it was 'good' to invent new taxes and raise old ones back in the FDR administration. If you think so, try to cash in an immature (or even a mature) T-bill sometime. You'd have been better off putting your money in your bank's "Christmas Club."

The fact is, the LAST thing we should be doing is contemplating raising SS taxes. We SHOULD be exploring ways to do away with Social Security altogether--the problem is, no one in Congress is smart enough to figure out how to do that and still maintain their little Social Security "slush fund." Nor is anyone in Congress apparently smart enough to understand that 8% earnings from the private stock market are MUCH better than the less than 2% "earned" by T-Bills- -in fact, 4 TIMES better. (See what even an average math IQ can do?)

Finally, the case for privatization goes even further. Suppose you pay into that imaginary "trust fund" from age 15 through age 60--that's 45 years--and then get sick and die. What happens to your "trust fund account?" It disappears. None of it is available to your heirs (unless they get to draw "survivorship benefits" or SSI disability payments.) Your unemployed spouse may get 50% of your expected monthly stipend under rare circumstances, but by in large, it just goes away and is NOT available to your heirs, even though you'd paid into this "account" faithfully every month for 45 years! In short, the government BENEFITS if you die before retirement age and neither you NOR your heirs ever see a dime of all that money. Not so with privatization. Anything invested in your private account belongs to YOU--not the government--and can be inherited by your surviving heirs in its entirety.

If, after reading this you think that Social Security is a "good deal" for you, fine. Don't opt out of the system. But, don't stand in my way or in the way of my kids who want to control their own money for their own benefit and not to finance some idiotic social engineering project dreamed up by the left.

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About the author: David A. Jared is a news junkie, semi-retired and an avid golfer who's been writing his first book, "4000 years of chopsticks" for the last 20 years. Email: Pappadave@sbcglobal.net

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