TheBrutalTruth
Well-Known Member
Why we must privatize Social Security By : TheBrutalTruth (2008-09-30 21:14:10)
Social Security is dead!
It is not Secure, but it is Social(ist).
It has become nothing more than another socialist wealth transfer scheme that transfers wealth from those that are working (from each according to their ability) to the old and disabled (to each according to their need).
To the average American Social Security is the promise that when we are ready to retire that our retirement will be guaranteed, and that the money that we have paid into the system will be returned to us.
What the government doesn't tell you is that its already spent or borrowed the money that you paid into Social Security.
Economist Thomas Sowell argues in his books and columns that Social Security is a pyramid scheme. For example, in "Social Security: The Enron That Politicians Have In the Closet", he writes:
Social Security has been a pyramid scheme from the beginning. Those who paid in first received money from those who paid in second — and so on, generation after generation. This was great so long as the small generation when Social Security began was being supported by larger generations resulting from the baby boom.
But, like all pyramid schemes, the whole thing is in big trouble once the pyramid stops growing. When the baby boomers retire, that will be the moment of truth — or of more artful lies. Just like Enron.
Just like Enron...
That is a disturbing factual statement.
During the 1950s and 1960s the government expanded the benefits, and then when it realized that maybe expanding the benefits wasn't such a great idea because it threatened the solvency of Social Security they started raising the tax rate and maximum amount that could be taxed.
It continued to do this from the original 2% of the first $3,000 to the current 12.4% on the first $102,000 that you earn.
Hell of a jump, and a hell of a lot more money being taken out of your pocket and then loaned to the government at absurdly low rates. Ironically, if the credit-worthiness of the government was rated honestly it would receive BELOW INVESTMENT GRADE, but the excess money from Social Security is invested in Bonds issued by the Federal Government.
But first we must all agree that it is broken, and that it has failed to live up to its promise of allowing citizens of the Republic of the United States of America to know that they would have at least some income in retirement.
That is no longer the case for any one that is now less than a decade into the workforce. By the time we retire we will have easily seen $84K vanish from our pay checks (assuming we all make at least $17K/year) during the lifetime of our employment.
Had we invested this $2,100 each year, or $175/month), in stocks we would see that $2,100 become $199,553.6 at just a 5% yield. But the average growth rate of stocks has been 9% per year, so that $2,100 would actually become...
...
...
...
$709,553.13, and at 9% the yield would be $63,859.78 per year, or in simple terms.
A HELL OF A LOT MORE THAN WE ARE GOING TO GET BACK FROM THE GOVERNMENT!
But the government is afraid that if we were allowed to actually have financial freedom we wouldn't need them any more. We would be able to enjoy life, and have fun. We would no longer be forced to beg, and grovel for them not to bend us over with high confiscatory taxation so much.
Now, imagine that since the average worker currently makes $50K that instead of just the measily $2,100 (which allows McDonald's workers to retire in comfort) we are paying in $6,200 per annum.
That $6,200 would become...
...
(this is really going to FUCKING SHOCK THE HELL OUT OF YOU!)
...
$2,094,871.16
yielding
$188,538.40/per annum.
That is... a lot of cash!
Of course, it also explains why any one with the bare minimum of intelligence should be busily investing as much of their income as possible in stocks on their own, because only then will they achieve financial freedom in retirement (actually probably before then.)
It also explains why the rich lobbyists, lawyers and bankers have fought tooth and nail to avoid any attempt to increase OASDI withholding higher than its current $102,000 cap. They know that it is a system for fools and morons, and know that they will be better off investing in a ROTH IRA to fund their own retirement.
But, Social Security was supposed to be a way to ensure that every American had a some what secure retirement. Why don't we convert it to a system that would result in Every American getting a Secure retirement that allows them to enjoy their "Golden" Years?
but what about the currently retired, and those that are in the middle of their career.
Well, there is a way to work around this. First, we have to acknowledge that the United States must keep its promises, and then we must figure out how to ensure that those that are currently on this socialist program continue to get benefits, and those that have contributed get their money back.
Probably the best method would be to slowly phase it out utilizing something like the Cato Institutes Plan.
New workers (and any one else opting out) would be allowed to divert their share of the social security contribution tax to private accounts that they controlled.
For maximum contributions of $6,200 a year or thereabouts (the figure is slightly higher, but this is close enough.) As the current work force ages and the last of the baby-boomers expires we can increase that until the entire Social Security Contribution is placed in privately controlled accounts.
That terminates Social Security in 40 years, and also would balance out the need for additional funds to ensure those that are retiring still see what the government promised them given to them.
We can also allow people who have already spent 20 years working to opt out entirely, and thus potentially accelerate the ability to allow individuals to contribute the full 12.4% of OASDI into private accounts that they control.
In the end not only will we have a government that has met its promises, but one that has also ended an inefficient system prone to fraud, cheating and corruption with one that is efficient, and fair, and greatly exceeds the promise that government made (and broke).
Or we can follow the plan of the Cato Institute and just allow people to opt out while seeing their 6.2% contribution go into private accounts (those already working would see a lumpsum pay out.)
America, we need to wake up to the fact that Social Security is broken, and that if we wait until it is in the red it will be too late to correct the problems with it.
We must stand up for our ability to fund our own retirement when empowered to do so, and stand up for our right as individuals to enjoy our old age in comfort and luxury!

[References]
IHF: What Every American Needs to Know about Social Security and the Mandatory Medicare-Enrollment Policy
http://en.wikipedia.org/wiki/Social_Security_(United_States)
Social Security Texas school district controversy - Wikipedia, the free encyclopedia
The 6.2 Percent Solution: A Plan for Reforming Social Security
Cato Institute (6.2% Plan)
Social Security is dead!
It is not Secure, but it is Social(ist).
It has become nothing more than another socialist wealth transfer scheme that transfers wealth from those that are working (from each according to their ability) to the old and disabled (to each according to their need).
To the average American Social Security is the promise that when we are ready to retire that our retirement will be guaranteed, and that the money that we have paid into the system will be returned to us.
What the government doesn't tell you is that its already spent or borrowed the money that you paid into Social Security.
Economist Thomas Sowell argues in his books and columns that Social Security is a pyramid scheme. For example, in "Social Security: The Enron That Politicians Have In the Closet", he writes:
Social Security has been a pyramid scheme from the beginning. Those who paid in first received money from those who paid in second — and so on, generation after generation. This was great so long as the small generation when Social Security began was being supported by larger generations resulting from the baby boom.
But, like all pyramid schemes, the whole thing is in big trouble once the pyramid stops growing. When the baby boomers retire, that will be the moment of truth — or of more artful lies. Just like Enron.
That is a disturbing factual statement.
During the 1950s and 1960s the government expanded the benefits, and then when it realized that maybe expanding the benefits wasn't such a great idea because it threatened the solvency of Social Security they started raising the tax rate and maximum amount that could be taxed.
It continued to do this from the original 2% of the first $3,000 to the current 12.4% on the first $102,000 that you earn.
Hell of a jump, and a hell of a lot more money being taken out of your pocket and then loaned to the government at absurdly low rates. Ironically, if the credit-worthiness of the government was rated honestly it would receive BELOW INVESTMENT GRADE, but the excess money from Social Security is invested in Bonds issued by the Federal Government.
But first we must all agree that it is broken, and that it has failed to live up to its promise of allowing citizens of the Republic of the United States of America to know that they would have at least some income in retirement.
That is no longer the case for any one that is now less than a decade into the workforce. By the time we retire we will have easily seen $84K vanish from our pay checks (assuming we all make at least $17K/year) during the lifetime of our employment.
Had we invested this $2,100 each year, or $175/month), in stocks we would see that $2,100 become $199,553.6 at just a 5% yield. But the average growth rate of stocks has been 9% per year, so that $2,100 would actually become...
...
...
...
$709,553.13, and at 9% the yield would be $63,859.78 per year, or in simple terms.
A HELL OF A LOT MORE THAN WE ARE GOING TO GET BACK FROM THE GOVERNMENT!
But the government is afraid that if we were allowed to actually have financial freedom we wouldn't need them any more. We would be able to enjoy life, and have fun. We would no longer be forced to beg, and grovel for them not to bend us over with high confiscatory taxation so much.
Now, imagine that since the average worker currently makes $50K that instead of just the measily $2,100 (which allows McDonald's workers to retire in comfort) we are paying in $6,200 per annum.
That $6,200 would become...
...
(this is really going to FUCKING SHOCK THE HELL OUT OF YOU!)
...
$2,094,871.16
yielding
$188,538.40/per annum.
That is... a lot of cash!
Of course, it also explains why any one with the bare minimum of intelligence should be busily investing as much of their income as possible in stocks on their own, because only then will they achieve financial freedom in retirement (actually probably before then.)
It also explains why the rich lobbyists, lawyers and bankers have fought tooth and nail to avoid any attempt to increase OASDI withholding higher than its current $102,000 cap. They know that it is a system for fools and morons, and know that they will be better off investing in a ROTH IRA to fund their own retirement.
But, Social Security was supposed to be a way to ensure that every American had a some what secure retirement. Why don't we convert it to a system that would result in Every American getting a Secure retirement that allows them to enjoy their "Golden" Years?
but what about the currently retired, and those that are in the middle of their career.
Well, there is a way to work around this. First, we have to acknowledge that the United States must keep its promises, and then we must figure out how to ensure that those that are currently on this socialist program continue to get benefits, and those that have contributed get their money back.
Probably the best method would be to slowly phase it out utilizing something like the Cato Institutes Plan.
New workers (and any one else opting out) would be allowed to divert their share of the social security contribution tax to private accounts that they controlled.
For maximum contributions of $6,200 a year or thereabouts (the figure is slightly higher, but this is close enough.) As the current work force ages and the last of the baby-boomers expires we can increase that until the entire Social Security Contribution is placed in privately controlled accounts.
That terminates Social Security in 40 years, and also would balance out the need for additional funds to ensure those that are retiring still see what the government promised them given to them.
We can also allow people who have already spent 20 years working to opt out entirely, and thus potentially accelerate the ability to allow individuals to contribute the full 12.4% of OASDI into private accounts that they control.
In the end not only will we have a government that has met its promises, but one that has also ended an inefficient system prone to fraud, cheating and corruption with one that is efficient, and fair, and greatly exceeds the promise that government made (and broke).
Or we can follow the plan of the Cato Institute and just allow people to opt out while seeing their 6.2% contribution go into private accounts (those already working would see a lumpsum pay out.)
America, we need to wake up to the fact that Social Security is broken, and that if we wait until it is in the red it will be too late to correct the problems with it.
We must stand up for our ability to fund our own retirement when empowered to do so, and stand up for our right as individuals to enjoy our old age in comfort and luxury!

[References]
IHF: What Every American Needs to Know about Social Security and the Mandatory Medicare-Enrollment Policy
http://en.wikipedia.org/wiki/Social_Security_(United_States)
Social Security Texas school district controversy - Wikipedia, the free encyclopedia
The 6.2 Percent Solution: A Plan for Reforming Social Security
Cato Institute (6.2% Plan)