As we should all be aware of by now, there is a concerted effort to destroy Social Security by changing its investments away from US Treasury bonds and divert that money into the stock market. This has not been an easy sell because who would you like to take care of your retirement: an efficient, safe, and secure government agency or the looters in the financial sector who think nothing of gambling with your money while pocketing huge salaries and bonuses and walking away with golden parachutes when they get caught?
One strategy that has been adopted is to try and create a generational war between old and young people. Older people are promised that their benefits will not be touched by any changes, thus hoping that they will sign on to a plan that will destroy Social Security for future generations. Meanwhile young people are being told that the old are greedy geezers living high on the hog off the Social Security contributions of the young who will be left with nothing when they get old, and that thus they should sign on to a system that would invest their retirement funds in stocks instead.
This was always a hard sell among the old. After all, most old people have children, grandchildren, nephews, and nieces whom they care about and asking them to ignore their future needs would be repellent for all but the most greedy and selfish among them.
The destroyers of Social Security may have hoped for a better response from the young but the good news is that the younger generation don’t seem to be falling for their pitch either.
So Alan Simpson can take his crazy coot act back to Wyoming.
Well, it worked for them when they set the upper lower class against the lower class, so they thought they’d try it again.
I’m often surprised by how badly most people understand social security and how it’s financed. I’ve run into people who seem to believe that the government takes your social security taxes, stuffs them into a piggy bank, and then they break open the piggy bank for you when you retire.
The system isn’t likely to collapse and any problems could be averted by either raising the retirement age a little bit or (better yet) not allowing people who are above a certain income after retirement from collecting social security benefits. I’m kind of hesitant to recommend raising the retirement age since I’ve seen reports that greater life expectancies are only being enjoyed by people who are better off.
The real push for ‘privatization’ isn’t to increase possible revenues or stabilize the system but to find a way to get more money out of the pockets or ordinary people into the pockets of big business, without big business having to provide any goods or services.
The problem is no gov’t agency is taking care of my retirement. In fact, they are spending the contributions I make to pay for some other person’s retirement.
If Social Security was still a true trust fund I’d be much more in favor of it. Truth is, its just more slush fund money for Washington to play around with.
I have written at length in the past about how claims that the trust fund has been spent are a myth. Social Security is a pay-as-you-go system in which current contributions from current earners got to fund current retirees. So in that sense it is a transfer of funds from present earners to past earners but as long as the system is maintained, when the current earners retire their benefits will be paid by the earners then.
The trust fund consists of the excess money that accumulated over the years when contributions exceeded outlays. This excess money purchased US government treasury bonds which can then be used in times when the outlay exceeds income. It is this fund that is projected to run out around 2035 or so. But even then, contributions form earners will still be coming in and even if absolutely nothing is done, future retirees will still get about 80% of the benefits they are entitled to.
The Social Security books are kept separate from the regular government budget so we know the current state of the fund. But of course money is fungible. But unless the entire financial system collapses and US Treasury Bonds become worthless, the system will work.
That is the leading cause of problems with various funds like Social Security (or the money held “in trust” by the gov for Native Americans): They use it to bomb shit. This is money no one is getting back.
The problem with trust funds is that they are market-based, and the market has shown itself repeatedly to be untrustworthy. Much more untrustworthy than the gov. And most such problems with the gov are not bureaucracy-related (although this can be an issue), but stem from the interchange between elected officials and their direct appointees, and corporate America.
Re averting the (still distant) problems, none of the above; the correct solution is simply to remove the cap on income subject to the FICA tax. Which would have the added benefit of making that tax (and thus the tax system as a whole) less regressive.
I’ll support Mano’s explanation. Simply put, treasury bonds are as good as cash. In fact, they’re better than cash, because they yield interest, which helps keep pace with inflation.
The only possible scenario in which treasuries cease to be as good as cash is utter economic collapse, in which case you’ve got bigger problems to worry about.
Perhaps more importantly, the related idea that the national debt is burdening future generations is bunk. The national debt is largely meaningless; it is essentially a score in a game where the government controls the distribution of points. People who talk about debt and GDP and other aggregate “measures” in the abstract with no grounding in economic factors that make any difference are simply ignorant. What you ought to be looking at are issues like employment, inflation, interest rates, the goods and services produced and their quality, land/factory/machine utilization, energy consumption, and so forth. Dollar amounts are arbitrary.
Japan’s debt is roughly 200% of GDP (ours is around 100% now). They are in no danger of runaway collapse and neither are we.
The largest single cause, by the way, of the current federal deficit was the Bush tax cuts (2001 and 2003). Raising taxes on the rich would be the most effective way to close the gap, if anyone is so intent on doing so. (I support this, purely for the sake of reducing income inequality, rather than the arbitrary goal of shrinking the deficit.)