Social Security Pessimism or “How The Young Will Get Screwed By The Old”
The battle lines are now finally being drawn publicly by both sides on social security reform. The president has only committed to the fact that he supports some form of very limited private retirement accounts (I think I read that he is recommending that 1/6 of our employee taxes could go to private accounts). He won’t address the issue of the costs of transitioning the system to pay for those accounts and he won’t discuss how the government is going to regulate how people will be allowed to invest their accounts. I guess they are saving the details for this spring…after most of the debate on the principle of private accounts has taken place. I am not optimistic.
The Democrats have decided to blindly declare that there is no crisis in Social Security. They declare that there is enough in the trust fund to cover any shortages that may occur when the boomers retire and after the trust fund runs out in 50 years many of the boomers will hopefully be dead and benefits won’t have to be cut or employee taxes raised. They would be right if there actually was a social security trust fund…a savings account holding the extra money the government has been taking out of paychecks since the 30’s that hasn’t been needed to pay for concurrent benefits. That money has all been “invested” in treasury bonds. This means the government borrowed the money to throw into the bottomless pit of government spending with the promise to pay it back when social security taxes are no longer enough to pay social security benefits. Of course all of this means that the government will have to borrow the money or raise taxes when it comes time to start paying the trust fund back (within the next 10-15 years). Every year that goes by the amount the government will have to pay back will grow. In current dollars the estimated shortfall is in the neighborhood of $33 trillion dollars. Click here for a very detailed analysis of the issue.
The Democrats don’t mind all of this because the easiest answer to the problem will be to just raise income taxes. Who ever heard of a Democrat who cried over more income taxes? Of course the Democrats know that there is a social security shortfall. They are planning on it. It will provide them with a lot of political ammunition and they will be brought back into power because of it. They have a political incentive to do nothing.
Neither side is giving us a good option for the future. The president’s plan is very minimal and is going to give us the worst of both worlds. Huge expenditures now (approximately $2 trillion) to pay to convert a small portion of social security to private accounts (for which we will likely have very few investment options) while still not doing enough to stop the rising debt social security benefits will cause in the future. The Democrats are putting their heads in the sand while insisting that there is nothing at all wrong with social security.
The only plan that could possibly have a remote chance of success is to end social security. In its place we should provide a needs based welfare plan for the elderly who have saved nothing for retirement and an apology to all those who were planning on having social security available as a supplement to their other retirement investing or pension. The current employment tax revenues should be enough to cover the minimum needs of those elderly who have nothing else. No additional taxes or borrowing should be done by the federal government to try to pay back the social security trust fund. We should all just admit that social security is dead and move on. Obviously this will not happen. Since most of the voting public is over 50…and they certainly aren’t going to vote to harm themselves…everyone 35 and under is going just going to have to bend over. We will provide the baby boomers with a retirement and pay for it through employee taxes and a series of huge increases in income taxes over the next five or six decades as the federal government begins paying back the trust fund. It doesn’t matter who wins the political debate over social security…anyone under 35 is screwed.
The really sad thing is that we haven’t yet heard any discussion about how Medicare promises are going to be fulfilled. The Medicare shortfall is approximately 5 times the size of the social security shortfall. Instead of dealing with it the President gave the elderly a new $500 billion (over the next 10 years) prescription drug benefit that we have got to try to find a way to continue to fund when the baby boomers retire. Thanks a lot jerk.
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Merry Christmas
Comment by Mum — December 23, 2004 @ 12:43 pm
HuMMM, didn`t I read somewhere on this blog YOU VOTED FOR HIM. LOL
Comment by Deb — December 24, 2004 @ 5:51 pm