If you’ve been reading the blog since the beginning, you’ll know I have a beef with Social Security.
Think about it, its the 1930’s, you haven’t worked in 18 months, your savings is gone, you have 3 hungry children and a wife, and the president just suggested a program to get you money that blurs the line between democracy and socialism. Are you going to care about political philosophy or food on the table? That’s exactly how and why Social Security was born. We would all do the same thing. You see the first generation of Social Security recipients didn’t contribute to the fund, it was literally free money to them, taken from the pockets of those that were about to work during the Great Depression. Since the first generation contributed nothing, that means that last generation will GET nothing. Will that last generation be with me? It’s possible, and I’m planning my retirement based on the fact that I won’t get anything. Here’s 5 more problems with Social Security:
SS Acknowledges Americans are Too Stupid to Save Themselves
The program was originally launched to get America out of a rut, now it simply serves as a 3rd retirement plan. You’ve got your 401(k)/pension, IRA, and Social Security. With options like the IRA and 401(k) that weren’t around in the 30s, its time we start looking for a way to wind down the Social Security program. Close shop, move on. But that’s not the American way. If we stopped taxing for Social Security, those of us that can’t save would look at the tax relief as free money and go blow it. They wouldn’t go save. Thus, Social Security exists because the government can’t trust the citizens to save for themselves. Lose/Lose. Either we bail them out now (Social Security) or we cancel the program and end up doing it again in 5 decades (Social Security, Return of the Geriatrics).
Even President Bush Knows its Screwed
And we still do nothing? Come one, the most laughable president in recent history launched a campaign to reform Social Security but you were too busy watching Randy, Paula, and Simon to care. Then Katrina struck and what little public support for reform existed was lost. Here we are another 3 years later and nothing has been done. Even the Rookie from Illinois and the Straight Talk Express are not giving Social Security the front and center attention it needs.
So those two weren’t so serious, but I promise the next three are dead serious
The Trust Fund
It was a brilliant move to set up the Trust Fund. Since Social Security relies on the current contributions of the working to pay the current retirees, the Baby Boomer generation was contributing far more than was needed. A trust fund was set up to hold the surplus until it was needed. Well if you read one of my first posts about borrowing money from your own retirement fund, you’ll know its a bad idea. The government obviously does not read my blog, regularly at least. They’ve treated the trust fund like its spare money to play with. The truth is the fund is now just a bunch of IOUs. Well those Baby Boomers have already started to retire, and the strain will fall on us. Those Boomers will get their money one way or the other. Either the working folks will have to pay more into Social Security, or the next administration will raise our income taxes to pay back the Trust Fund. Either way, unless you’re over 50, you lose.
Its a Pyramid Scheme
Do you know what a Pyramid Scheme is? Basically I can start a game where you give me money and I’m set for life. Then you need to get two people to give you money and those two need to get two each. Now we have a pyramid of 4-2-1. Unless you are on the bottom row you are in good shape. Obviously the success of a pyramid scheme relies on the bottom row always being larger than the row just above it. Social Security is a pyramid scheme. It relies on the next generation of workers being larger than the generation that came before. If that is always the case and there are jobs available, the system works. Well again the Baby Boomers are a generation much larger than what has come after. Imagine a pyramid thats fat in the middle and skinny at the top and bottom. The system won’t work. FDR had to assume continued, stable, long term growth in population, but the Boomers did not have as many children. There are less of us to support the Boomers.
Its Going Bankrupt
Estimates vary, but sometime in the next two decades we’ll need that trust fund. It will probably be sooner than later unless the economy hits a big growth spurt in the next 5 years. People will want their money. Two decades after we need the trust fund, it will be dried up. The money is gone, out floating in the economy somewhere; but those in need of their monthly checks will still need their checks. Reform is absolutely a necessity, and so far no one has come up with a plan that won’t screw the generations after the boomers out of their cut. Either we pay more taxes now, or we get less benefits later.
There are a few bonus issues with Social Security that I found after initially writing this post
When Social Security was created, the politicians exempted themselves. Oh they still got benefits, they just didn’t have to pay. In fact, it wasn’t until the 80s that any employee of the Federal Government had to pay. That was almost 50 years of no contributions from any federal employee, President and Congress included. Surprised? Doubt it.
Again a system designed to help the poor might do more for the rich. A good rule of thumb is that the more money you have, the longer you stay alive. Like a pension, you’re paid upon retirement until you’re dead. The wealthier classes tend to live longer, so they get more Social Security. FDR probably didn’t think of this when he signed it into law, but its one more thing that needs to at least be discussed.
If you already have a 401(k) and IRA, chances are you know a thing or two about investing. If given the option to opt-out of the program, you’d rightly move that money you were paying to your retirement accounts. Unless you live to be 115, you’re probably better off investing on your own than relying on the government (and your working grandchildren) to fund your retirement.
Some of what I said is based in solid fact, some of it is opinion and theory. However everything I’ve said does stem from facts and research. Its not meant to be your final source for forming your own opinion, I’ve only presented enough to get you interested. Do your own research and then write to your Congressman/woman/thing/slug and ask where they stand. Better still ask the people running against them where they stand.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. |
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