Social Security in 2005

March 6, 2005

Bush wants to change Social Security to allow younger workers to invest part of what they would have paid into the system into the stock market through government approved investment options. This way they would have some sense of ownership and could make more money than if the funds were kept in the Social Security Trust Fund.

Based on history of the stock market that would be right and people would probably make 3 to 4 times what they would otherwise. Certainly a nice chunk of money for retirement.

Social Security is our society's basic safety net for the retired. It requires workers and employers to pay into the system and it has worked fairly well. However, it was never intended to provide all the funds necessary for retirement. Bush says the extra amounts people make from their private accounts would help with that problem.

He is right.

Where Bush goes wrong is not coming up with details for the plan. You see, if 10 percent is invested by the worker, there is that much less deposited into the System. How are we to make up for that? No one is saying.

Private accounts take away from the trust fund which older workers need for the future and this plan weakness allows for all sides to use fear to sway one group or another. Or even to sway themselves into keeping the status quo.

The amount not paid into the System is hard to pin down. No one has many details but the figures in recent reports show it is between 2 and 5 trillion dollars. That's a lot of money. Knowing how accurate this current administration has been in estimating costs, that figure could easily go to 10 trillion dollars.

Not much comfort for the retired or pending retired.

The money has to come from somewhere. But given the current Republican Congress and Bush, we now have record deficits and adding this to the deficit would be wrong. Bush and company have increased the deficit a trillion dollars a year since 2001. It was just under 4 trillion before that.

This is a bad legacy for a party that crows about fiscal responsibility. It is also very bad for everyone.

The Social Security system needs a lot of fixes, they are:

Raise payroll taxes to fix the long term financial problems, otherwise benefits will have to be reduced no matter what scheme is adopted;

Increase the retirement age for everyone based on accurate audits;

Develop laws or even a constitutional amendment to prevent Congress or any person from tapping into the Social Security Trust Fund as they have since its inception;

Expand the current Individual Retirement Accounts system by removing contribution limits and allow contributions on unearned income;

Encourage saving by all citizens. This is easier said than done but incentives could be created and

Discourage personal debt, especially credit cards.

There is no easy way to help Social Security, but Congress and Bush will try to find it anyway but only for a short while. The 2006 elections are already looming and if a decision isn't made by the end of 2005, then it won't be.

We need real and honest changes but don't count on them. Start saving like hell, stop charging those credit cards and hope for the best!