Social Security

Beth: ‘I read your article in Sunday’s PARADE about fixing Social Security. Not long ago I received an e-mail suggesting that one sure way to assure Social Security got fixed quickly would be to require Senators and Representatives (who apparently have their own much better retirement system) to become part of the Social Security system. Would that really work, assuming it could be done?’

☞ There’s a myth careening circulating endlessly around the Internet – perhaps you’ve received it – that suggests our representatives in Washington would fix Social Security pretty darn quick if THEY had to pay into it. Instead, it says, they retire with more than $15,000 a month (!!!!) EVEN IF THEY’VE SERVED JUST A SINGLE TERM!

The truth, however, is that Congressfolk DO pay into Social Security, and have been doing so since 1983. They also pay into a pension plan. It provides no benefit unless they’ve served at least 5 years – at which point they’d get about $1,600 a month. It provides retirement with full pay after 40 years. But after 40 years in Congress, they might not have too many years left to receive it.

So it’s not true Congress doesn’t want to fix Social Security. It’s just that they are afraid, if they even suggest it, they will lose their jobs.

David Nanney: ‘I would like to make one suggestion for solving the ‘Social Security Crisis’ that you did not mention in PARADE. If I could sign a paper releasing the Social Security Administration from EVER providing ANY benefits to me, but, NEVER taking another penny from my check AND returning EVERY PENNY taken from my checks since I began working, I’d sign it tomorrow. I can do a more superior job of investing my money than the government without any doubt.’

☞ Here’s the thing: you’re right! As long as we can abandon all the 80- and 90- and 100-year-olds now getting Social Security (and somehow find the cash to refund all you’ve paid in, as you request), the problem is solved. But if we can’t abandon them, then we have to keep their checks flowing, which means taxing working Americans – you – to do it. The one silver lining is that, the way this works, when YOU are 95, there will be workers not abandoning you, either. You might not need help from anyone . . . but conceivably, thru one vicissitude or another, you might.

Mary McLaughlin: ‘We have a problem with Social Security because people that never paid into Social Security are receiving Social Security. It is the right time to privatize Social Security, so that if the individual should pass away the money will go to the name shown on documents. I cannot collect on the money my husband paid into Social Security, because my earnings were greater. But a widow that has never worked does collect. This is wrong.’

☞ My view is that a wealthy, compassionate society needs a ‘safety net’ for its elderly. If you accept that premise, then you will inevitably have serious inequities – for example, one widow getting a much better deal than another. Or the raw deal for smokers (who pay as much into the system as everyone else, but then, as a class, because they live significantly less long, receive far less in benefits).

Wilbur Gearity: ‘I am disappointed that you promote the political illusion that Social Security is a retirement system rather than the grandiose Ponzi scheme that it actually is. As I am sure you are aware, a Ponzi scheme requires a continuing flow of new ‘investors’ to pay off earlier ones. It is doomed to failure because at some point it is impossible to get sufficient new ‘investors’ to successfully pay the increasing pool of established ones.’

☞ I do know what a Ponzi scheme is, but because you also know what it is, you know the analogy is not fair. It’s certainly reasonable to assume, or at least to hope, that each generation will produce children and grandchildren who are productively employed.

If so, one way or another (or in a combination of ways), they may provide some minimal standard of living for the elderly, just as they would hope their children and grandchildren would do for them.

It’s true that as lives have lengthened and families shrunk, some adjustments are required. That’s what the article advocated: a relatively painless three-part fix:

1. eliminate the cap, currently $87,000, on which income is taxed, but make the tax rate on that excess income a modest 1.5%;

2. because we’re living longer and stronger, raise the age at which full benefits may be collected (currently 65 years and 2 months, slated to reach 67 by 2024) by one more year (to 68 by 2036);

3. tie a retiree’s initial benefits to price inflation instead of wage inflation, at least in part – a technical adjustment that would have a big impact.

Wilbur continued: ‘Please explain how one raids a Trust Fund that is composed of nothing but IOU’s (Treasury Bonds that cannot be bought and sold in the financial markets).’

☞ These IOUs are counted as part of the National Debt. If we pay down the debt – as Republicans once actually wanted to do – we put ourselves in better and better shape to handle the baby boom bulge. If, instead, we ADD trillions of dollars to the National Debt, as we did under Reagan/Bush and now are doing again under Bush/Cheney, we weaken our ability to meet these obligations (and much else). The Clinton/Gore slogan was ‘Save Social Security First.’ The idea was to run a true balanced budget, using today’s Social Security surplus (because today we collect even more in FICA than we pay out in benefits) to pay down the National Debt. That way, there’d be plenty of national financial strength and borrowing power to handle the Social Security claims of the Baby Boom bulge. Instead, Bush chose a modest tax cut for the middle class (which one could argue was OK, especially in the face of a recession) and a massive tax cut for those earning millions of dollars a year. Terrible for the country, though nice for the rich.

‘If this is class warfare, then my class is winning.’
– Warren Buffett