Apr. 27, 2014

This subject is addressed in several ways under the different "Economic" topics but deserves a page of its own.


Social Security is broken in it's present form. Assuming we WANT to fix it then we have to develop a new paradigm.  One that consists of a rational view of what Social Security is intended to achieve.


Initially, Social Security was designed to ensure that we, in the U.S., didn't grow into a nation of destitute older citizens.  It was not designed to assume the role of correcting every inequity in the economic system.  However, because of the politics involved when it was passed we adopted an attitude that it was an investment which everyone would be able to draw upon as they grew older.


Instead of an investment we need to approach the subject as though it was an insurance policy. One that will ensure none of us become destitute but only provides for our NEED.  In order to ensure it is "everlasting" and "sustainable" we need to make some basic adjustments.

First, we need to accept that it is an insurance policy and that if individuals work hard and get a secure footing they cannot expect to recieve a return.  This is called "means testing" and assumes that individuals like Bill Gates, with $53 Billion, don't need the government to give them a monthly check. IF,they later fell upon hard times they would then be eligible. The issue would be: "What is an acceptable level of wealth that disqualifies an individual?" That is debatable but the result would be millions of individuals immediately taken off the Social Security net drastically reducing the long term drain.


Second, we need to make the system more progressive.  Currently, individuals stop paying payroll taxes after they reach a relatively low cut off.  This means that as you get rich you stop paying into the system. In short, the poor pay to keep from being poor. If the cut off was eliminated and the rate of payment was increasing at a declining rate the entire system would be paid for and security would be available. 


Third, and this is really controversial, we need to reexamine the method that Social Security is funded.  Presently we send money to the government which is supposed to be placed in a trust fund drawing interest.  In reality, Congress, long ago realized that they could spend that money and simply declare a committment to reimburse the fund. NOW, and we have to open our minds, there is a better way. American bonds are the safest investment our citizens can make. Unless the government dissolves those bonds will always be safe. Take 20% of the payroll taxes out of the trust fund and invest them in Government long term bonds. That would: 1. ensure a larger return on investment. 2. Help to fund governmental projects over time. 3. Internalize our debt so that interest would be paid to our own citizens. 4. Yield everyone needing a retirement a larger monthly return.

WHY, won't these things happen? Think about it. It would place a larger financial committment on the richest campaign doners. It would mean that Congress couldn't use 20% of the payroll taxes for any porkbarrel project they wanted. It would mean that, with restrained spending, over time our national debt would become internalized. None of these things appeal to the politically dominant minority. In particular, the progressive minded politicians, do not want the masses less reliant upon the government with a secure future.


These are things to think about.