Privatizing Social Security

It’s incredible. Liberals are at again. Screaming that you should not have a choice in how you invest or use your money for your retirement plans. This is all about privatizing Social Security. It’s already being done for Federal workers ever since in 1987. The Thrift Savings Plan, which as of December 2004 had assets of $152 billion, is a retirement-savings plan open to all civilian federal employees, including senators, and all members of the uniformed services. This includes Senator Harry Reid, a screaming Liberal, who is against the idea of Social Security privatization. Yet he participates in the Thrift Savings Plan! How convenient for him. Remember his name for now.

Even Bill Clinton agreed that privatization of Social Security ought to be done. In fact, Clinton warned that there were only three possible ways to reform Social Security: 1) raise taxes, 2) cut benefits, or 3) find a way to receive a higher rate of return through private investment. Payroll taxes are already so high and benefits so low that young workers receive a rate of return on their taxes of barely more than one percent, far below market returns (actually it closer to a negative rate of return). Raising taxes or cutting benefits will only make that bad deal worse.

Only the third option -- private investment -- solves all of those problems. It preserves Social Security's solvency and increases returns to young workers while allowing workers to accumulate real and inheritable wealth.

Bill Clinton wasn't able to follow through on Social Security reform. That responsibility has now fallen to President Bush.

Now, In the Thrift Savings Plan, Federal employees can invest as much as 14 percent of their salaries in one of five retirement funds. Even if they do not want to participate, the government contributes 1% of their base pay for free! Free money added into their Social Security retirement plan.

Now, let’s consider the rate of return of C Fund, one of the five. It is a common-stock fund, (think Blue chip, Dow, and Nasdaq) so it should represent the risks that Senate minority leader Harry Reid thinks should terrify Americans:

In only four of 17 years has the rate of return been negative. But in 11 years the rate has been greater than 10 percent, in eight years it has been greater than 20 percent, in four years it has been greater than 30 percent! The compound annual rate of return for the last 10 years has been 12 percent, and the return over the 17 years has been 12.1 percent. You have to look at the long term returns and not the yearly return.

And funny that Reid participates in the plan, but opposes allowing all Americans the comparable opportunity that Bush is proposing. Imagine every Democrats or Liberals opposing the privatization of Social Security even though each and everyone of them have a choice in the Thrift Savings Plan!

But you’ll hear the “buts” from Liberals and nay-sayers who are adamantly against Social Security privatization. Suppose the stock market crash and go bankrupt? So what? Everybody would lose. That’s a no brainer. Social Security as we know it would be *kaput!* Where do you think will happen to the workers? They are the ones that pay into the existing retirees’ monthly Social Security check. Currently, approximately 3 workers pay into the Social Security system that fund one retiree's monthly retirement check. Thirty years to forty years ago it was 6 workers that paid into for one retiree’ monthly Social Security check. And in a few more years the number will have a ratio of 2:1 with two workers paying for one retiree’ SS check. And just to ensure that one retiree get his/her same month SS check, payroll taxes will have to go up for those two current workers under the current Social Security system.

You want to pay more taxes to support a retiree’s monthly Social Security check? And nothing to contribute to your retirement plans?

Now, you can check out the Congressional Budget Office (CBO) who have http://www.cbo.gov/showdoc.cfm?index=5530&sequence=0 been asked to evaluate the long-term economic and budgetary implications of current laws governing major entitlement programs and of legislative changes to those programs. In accordance with its mission to provide the Congress with budget projections and estimates of the costs of legislation, CBO has sought to enhance its capacity to produce long-term analyses. As a starting point, the agency presented comprehensive 50-year scenarios for the federal budget in December 2003 in The Long-Term Budget Outlook. (Background on Social Security, including information about the program's structure and financing, underlying demographic trends, and strategies that have been proposed to prepare for the aging of the U.S. population, can be found in an earlier CBO publication, Social Security: A Primer, published in September 2001). In short, the long term projection is not good if we stay with the current Social Security system.


FACT #1: Social Security was designed to supplement your pensions and your own personal savings plan (eg savings banks, CDs, IRAs, Market funds, personal investment, etc). The monthly Social Security check was not meant to be as a sole source of income when you retire. It wasn’t meant as a “safety net” either. It’s supplemental source of income. It has always been that way. Liberals just want to believe it’s your sole source of retirement income. It’s not.

FACT #2: Workers today pay into the Social Security *FOR* retirees only, and not for themselves. That means when YOU retire, you better hope there will be enough workers who will pay into for your Social Security monthly check. It is the current workers’ money that pays into the retirees’ monthly Social Security checks.

FACT #3: People will have a choice on whether to participate in the privatization of their own Social Security where the money they put into while they work is their money alone…and not to some retiree’s monthly check.

FACT #4: The privatization plan affects only current employees. Those who are already on Social Security (or close to retirement) will not see a change in their monthly checks.

FACT #5: The government is actually *stealing* your money to pay for somebody else’s retirement. It’s not yours to begin with. It never was your money. It belongs to Joe Schmoe who is retired. And to continue the funding of Social Security means that there will be less workers to fund the system and the payroll tax will have to raised in order to fund the month Social Security checks. Again, more stealing of your money by the government to pay existing retired people who never really planned or saved for their retirements.

FACT #6: It is YOUR money. Not the government. Not the retirees’. But YOUR money and you should have a say on how to control your money. This is about choice. Current Social Security does NOT give you a choice. The existing Social Security is nothing more than a pyramid scheme when you have less people paying for that one person at the top of the pyramid (e.g. retiree). Somebody’s going to get hurt at the end when it is all said and done because existing Social Security system cannot maintain their course of direction indefinitely. It need to be reformed on a massive scale.


From Vox Libertatis ac Veritatis (The voice of freedom and truth):

Plainly stated, Social Security is broke. Why are Democrats so quick to increase the tax burdens on the wealthiest Americans yet at the same time stand by this outdated system? Social Security taxes are regressive, meaning poorer Americans pay into the fund with larger percentages of their wages than middle and upper class Americans. In 2018, the federal government will begin to pay out more in Social Security benefits than it collects in Social Security taxes. The money which 2018 retirees will have paid throughout their working life and which should be collected by them upon retirement in 2018 is not stored somewhere the same way we store money in a bank account. That money was loaned to other areas of the federal government through special bonds—IOUs from one part of the government to another. Without changes, by 2042 the system will be unable to continue paying full promised benefits. To repay these "IOUs," the government will need to collect $5 trillion from taxpayers by then—an increase of $33,000 per family or a hike 50% hike of payroll taxes. The other option would be to cut benefits by more than a third.

It does not take a Ph.D. in Economics to know that the market performs best over the long haul. Examine any 40 year period (assuming a person starts payments at age 25 and begins to receive benefits at age 65) in stock market history, and you will see a growth rate 10-15% over that time, compared to the negative -1% return under the present system.

Yet it will cost 2 to 3 trillion dollars to help pay for the transitioning to the privatization of Social Security that tax payers will have to support. This will be a somewhat painful, but no where near as painful to watch Social Security as we know it become increasingly useless starting 10 years from now. It will take trillions more than the current 2 to 3 trillion dolars it’ll take to currently revamp Social Security now than to try and save Social Security 10 years down the road when everybody’s in a panic mode, costing us even MORE money to save the Social Security system.

What would you rather have? A system that has a range of 5 to 15% rate of return or a negative -1% return under the existing Social Security retirement system (which was not designed as a sole source income)?

Hey, I want to control MY money and see that it stays under MY name when money is deducted from MY paycheck. I don’t want to depend on some “IOUs” from the government when I retire.