Saturday, November 06, 2004

Social Security – Avoiding the Stupid Pond

Kerry tried to make it a hot topic during the campaign but let’s face it, Social Security is boring. Boring that is until you need it. Maybe its your grandmother or your parents who get that monthly check. Not especially big but ask them to do without it. As for the rest of us, even with your pension (if you have one) and your IRA and your 401K you will still find yourself severely compromised in your sunset years without Social Security. Is the system in trouble? Yes and no.

Here’s what the
Social Security website says:
If Social Security is not changed, payroll taxes will have to be increased, the benefits of today's younger workers will have to be cut, or massive transfers from general revenues will be required. Social Security's Chief Actuary states, "If benefits were reduced to meet the shortfall in revenue for the combined program, the reduction would need to be 27 percent starting with the exhaustion of the Trust Fund in 2042 and would rise to 32 percent for 2078. Alternatively, if additional revenue were provided beginning in 2042, revenue equivalent to a payroll tax rate increase of about 3.1 percentage points (from 12.4 percent under current law to about 15.5 percent) would be needed for the year. The additional revenue needed for 2043 would be equivalent to a payroll tax rate increase of about 4.5 percentage points for the year. Thereafter, the amount of additional revenue needed would gradually rise, reaching an amount equivalent to an increase in the payroll tax rate of about 5.9 percentage points for 2078 (or about 50 percent higher than today's rate).
If we leave well enough alone the system will last another 38 years. If we make a few minor changes now it may last even longer. However, if we were to, say, reduce the amount going into the fund and divert that money into personal retirement accounts 38 years might fall to 10 years. Is the system in trouble? That all depends on W. and us. Is my information factual. No, but in future posts it will be.

ALL OF US, Liberal, Conservative, Christian, Gay, Straight, Atheist, and other Americans need to become well informed and fast. You see, W. thinks he has a mandate and all of that political capital he thinks he earned on November 2nd is just burning a big hole in his pocket.

What can we do? The first thing we need to do is study up on Social Security. For that I have included a link in my links section – put more suggested links in the comments field. Next, we need to learn what W. has in mind and coordinate a response. If he has a good idea (why am I doubtful?) then we need to encourage him. If he has a bad idea then we need to let the world know it – especially that part of the world that includes the House of Representatives and the Senate.

Let’s work together to stay our of the stupid pond on this. This not a conservative issue, it is not a liberal issue, this is an American issue and that means ALL OF US!


At November 8, 2004 at 6:14 PM, Anonymous Anonymous said...

G.D., you wrote:

"However, if we were to, say, reduce the amount going into the fund and divert that money into personal retirement accounts 38 years might fall to 10 years."

I am not up on this so I won't pretend to be. However, why does allocating some moneys into personal retirement destroy social security? It seems to me that all that is needed are some saftey valves (e.g., HUGE penalties for--or flat out prohibitions of--making early withdrawals; limitation to investment in index funds, etc.). Taking money out of SS and letting individuals invest themselves only results, it seems to me, in the individuals reaping the consequences of their own actions. Those who invest wisely (e.g., S&P500 index, with a historic rate of over 10%) will probably kick SS in the pants. Those who do so poorly will be out of luck (hence the need for safety valves). But reallocating some of SS also means that less will be drawn from how does this result in the funds disappearing in 1/3 the time? Help me out here.

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