How the rich created the Social Security “crisis”
The Bush tax cuts coupled with a decades-long smear campaign are the real threat to the successful program
http://www.salon.com/2011/11/03/how_the_rich_created_the_social_security_crisis/singleton/
As the article states, this ‘crisis’ is entirely manufactured (the same, I learned recently, as the Post Office ‘crisis’, it can’t be a coincidence). Social Security is ‘insolvent’ because our government has stolen the excess funds and left nearly worthless Treasury securities in its wake and now is refusing to make good on those securities. Since treasuries are considered uber-safe, they pay at or just barely slightly higher than inflation so all that hard earned money put in (for most of us, 14% of our compensation (7 from us, 7 from our employer)) is growing at exactly zero interest rate (when adjusted for inflation). So, after basically getting an interest free loan from OUR money (not even tax dollars which the government has a legitimate reason to obtain and spend) now the government whines about paying it back! If, and only if, the past surpluses stolen and replaced with treasuries were to run out, only then would the government have a legitimate claim that Social Security can’t fund itself. However, instead of investing in nearly worthless treasuries (worthless from a return on investment point of view), if the money was instead invested the same way that insurance companies invest then we would be seeing returns large enough to more than compensate for the average life expectancy. I did some quickie calculations and determined that if you started your earning career at age 25 making $25K and got only a 3% raise each year (quite an unlikely occurrence, but this is sort of worst-case scenario) saving the exact same 14% but earning a whopping 5%, starting at age 65 you could get half your salary (at age 65 and still growing at 3%) for almost 20 years. Since SS is a pool of money, those that die before they draw down their ‘fair share’ subsidize those who live past their target age of death. If the government didn’t medle with the money and it was managed like a real investment fund, there would be no talk of insolvency.
Having said all that, the reality is since the government has indeed stolen the money and left these IOUs. In order to pay back the IOUs the government will have to raise taxes, reduce spending or cut benefits (it could do all three and minimize the impact, but that would presume that our government actually represents the people and targets the greatest good for the greatest number). This unfortunate reality is why younger people (and I consider myself one of that group since I have nearly 20 years to go to start collecting an SS check) don’t believe that income will actually be there when then are supposed to get it.
