The Case for Social Security Personal Accounts (a MUST in our future)
Personal Accounts for retirement is a MUST for our future retirees. There is no getting around it. The cry is “there is plenty of money in the Social Security Trust Fund to handle the current and future retirees”. Well, YES the money will be found somewhere, But then definitely NO.
Yes there should most certainly be more money in the trust fund if it were in the trust fund. But what we have in the trust fund is a bunch of unfunded Treasury Notes. You see the government took the money paid in and replaced it with Treasury Notes which are merely the US Government’s promise to pay the value of the note. But guess what? There is no money to pay the value of the note! The money is all gone and we are now borrowing $.40 of every dollar the federal government spends. This is certain to go up as the years go on if our politicians and PEOPLE don’t get their heads straight.
NO. There isn’t enough money that has been paid in to sustain the current Social Security System even if the money were there! This is FACT people. Why? Because every person who retires collects every cent they put into the system within two years after they retire. This you can verify yourself if you care to. SS keeps a record of all you have put in over your working life which they will gladly send you and then all you have to do is a bit of math.
So the bottom line is that anyway you want to chop up the problem it means the retirees of the future will be SOL because we old geezers in our fear of losing our Social Security teat to the Nanny State have screamed down every politician who has dared to mention the words Social Security. Are we all so old we have lost our brains or ability to read the hand writing on the wall? The Ponzi scheme is over, the jig is up. Our young workers will continue to pay for “our” last days but for God’s sake can we wise up enough to allow a sane dialog about “their” retirements?
I sincerely hope so and this dialog must begin soon and with all options on the table. Personal Savings Accounts are a viable option and the following articles (please go to all referenced articles also) will explain them. It behooves all of us to understand these new fangled things because young or old we all have a stake in them. the young peoples stake is obvious; the old people’s stake is that it is our children’s futures here. BB
Posted by Daniel J. Mitchell
There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely caused by demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits.
Social Security reform received a good bit of attention in the past two decades. President Clinton openly flirted with the idea, and President Bush explicitly endorsed the concept. But it has faded from the public square in recent years. But this may be about to change. Personal accounts are part of Congressman Paul Ryan’s Roadmap proposal, and recent polls show continued strong support for letting younger workers shift some of their payroll taxes to individual accounts.
Equally important, the American people understand that Social Security’s finances are unsustainable. They may not know specific numbers, but they know politicians have created a house of cards, which is why jokes about the system are so easily understandable.
President Obama thinks the answer is higher taxes, which is hardly a surprise. But making people pay more is hardly an attractive option, unless you’re the type of person who thinks it’s okay to give people a hamburger and charge them for a steak.
Other nations have figured out the right approach. Australia began to implement personal accounts back in the mid-1980s, and the results have been remarkable. The government’s finances are stronger. National saving has increased. But most important, people now can look forward to a safer and more secure retirement. Another great example is Chile, which set up personal accounts in the early 1980s. This interview with Jose Pinera, who designed the Chilean system, is a great summary of why personal accounts are necessary. All told, about 30 nations around the world have set up some form of personal accounts. Even Sweden, which the left usually wants to mimic, has partially privatized its Social Security system.
It also should be noted that personal accounts would be good for growth and competitiveness. Reforming a tax-and-transfer entitlement scheme into a system of private savings will boost jobs by lowering the marginal tax rate on work. Personal accounts also will boost private savings. And Social Security reform will reduce the long-run burden of government spending, something that is desperately needed if we want to avoid the kind of fiscal crisis that is afflicting European welfare states such as Greece.
Last but not least, it is important to understand that personal retirement accounts are not a free lunch. Social Security is a pay-as-you-go system, so if we let younger workers shift their payroll taxes to individual accounts, that means the money won’t be there to pay benefits to current retirees. Fulfilling the government’s promise to those retirees, as well as to older workers who wouldn’t have time to benefit from the new system, will require a lot of money over the next couple of decades, probably more than $5 trillion.
That’s a shocking number, but it’s important to remember that it would be even more expensive to bail out the current system.Daniel J. Mitchell • January 10, 2011 @ 10:56 amRelated Content from Cato.org (These are all good articles that I have read from time to time and even blogged on in the past. BB)
- Michael Tanner’s Testimony on Social Security and Personal Accounts
- Private Social Security Accounts: Still a Good Idea
- Large Accounts and Small Cash Deficits: Increasing Personal Account Size within a Fiscally Responsible Social Security Reform Framework
- Personal Accounts in a Down Market: How Recent Stock Market Declines Affect the Social Security Reform Debate
- The Case for (Carve-Out) Personal Accounts