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Jan. 21, 2005 Much on the minds of the press, and Democrats in particular, is the subject of "Social Security Reform" proposed by President Bush. Social Security was established in the 30's by President Franklin D. Roosevelt specifically for the STATED purpose of supplementing retirees' incomes. It was NEVER intended to supplant retirement plans--only to supplement them. Perhaps the REAL reason may have been two-fold. (1) As a means of raising taxes which would NEVER have flown otherwise in the middle of the Great Depression without the brilliant selling job the FDR administration did, and (2) as a means of giving elderly people a government sop in order to insure their future political support for Democrats in general and FDR in particular. What Social Security IS is an ill-disguised Ponzi scheme--that is, a scheme very much like those pyramid schemes which have basically been outlawed nationwide today. The plan was that all workers were to "contribute" to the Social Security "trust fund" a fixed percentage of their salaries and then, upon reaching the age of 65, be able to draw on that fund to supplement their own retirement savings. At the time it was instituted, the average lifespan of SS recipients was such that people were anticipated to only draw on the fund for 3 to 5 years. In other words, they were NOT expected to be able to draw out all that they'd contributed because money in the SS trust fund could not be passed onto one's heirs. It was anticipated that dozens of workers would be able to easily support each retiree. As late as 1945, there were over 44 workers supporting each SS recipient. However, Congress over the years has seen fit to raise both the tax on contributors AND the benefits paid out to recipients and the average lifespan has gone up to the point where it's not uncommon for someone to draw Social Security for 20 years, instead of the 3-5 originally envisioned and it now takes 3 and a third workers to support each retiree. Such a program is destined to go broke very shortly and we are rapidly approaching the point where we'll be paying out more in benefits than are being taxed away from the people still working which will require either a raising of FICA taxes or lowering of benefits paid out, or both. Additionally, another problem is that there really is no "trust fund." What's collected in FICA taxes each month first is spent to pay benefits to those currently receiving them. Any surplus is, by law, required to be invested in T- Bills and the proceeds from the sale of T-Bills is part of the general revenues which are spent by Congress. In essence, what the trust fund consists of is a bunch of low-interest-bearing IOU's. That's not to say they are worthless, by any means, but they must be redeemed by the government on demand out of current tax revenues! Democrat opponents of reform lament the "fact" that people on SS "use up everything they've contributed into the fund within 7 years after retirement and everything they receive after that is money they didn't contribute." What's missing in this calculation is what Einstein once termed as the most important invention in history....compound interest. Also missing is the fact that employers' matching contributions aren't usually calculated into this total. Restricting the "investment" of surplus SS money to T-Bills, which historically have a relatively low rate of return, makes the money available to each recipient much lower than otherwise would be the case. Plus, don't forget that SS "accounts" cannot be left to one's heirs. Let's examine one case in point. There was a time back in the mid-70's during which entities could "opt-out" of Social Security provided they collected a like amount of money from workers to be invested in the equivalent of today's 401K's. The City of Galveston, Texas, was one such entity that chose to opt out, continue to collect money and invest it in mutual funds in the stock market. The average SS recipient now collects about $1,100 per month in benefits and, upon their death, anything left over goes back to the government--not to their heirs. The average retiree from Galveston, however, draws an average of $7,000 per month and anything left over can be passed on to one's heirs. I'll leave it to the reader to decide which you'd rather do. The fact is, stocks and bonds have earned an average of about 8% annually since 1929, with a glitch or two here and there, of course, but on average, have yielded a MUCH better return on investment than T-Bills ever will. Social Security is BADLY in need of reforms but Democrats will probably demagogue the issue into the ground in an effort to scare the daylights out of those short-sighted enough to be relying solely on SS "benefits" by telling them (wrongly, of course) that their benefits would be cut by the President's plan. That's NOT going to happen in the President's program, but that won't matter much to Democrats who've used the revenues from those T-Bills (and the SS system itself) to buy the support of special interest groups, particularly those who either don't understand the implications of SS reform or who don't keep themselves well enough informed about what the President's plan actually is designed to do. ------------ 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 ------------- All articles are EXCLUSIVE to Useless-Knowledge.com and are not allowed to be posted on other websites. ARTICLE THIEVES WILL BE PROSECUTED! |
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