Social Security Reform

I'm sure all of you are aware of what social security is, but on the off chance one of you has been living in a cave for the last 40 or so years, a brief review is in order. Social Security is a form of social welfare designed in the late 1940's as a way to fund our retired and indigent people. You may know it better as FICA, when it is taken from your paycheck. This money is then stockpiled, and invested in ultra-safe, but low yield government bonds. A certain percentage of the gains are given back to the fund, and the government scoops off the "slush". The problem here is not the idea, but the program. The social welfare program we have, as it stands, is a dinosaur. It is simply no longer making money, and in fact, losing it. The program must be re-designed; to do anything else is a waste of hard earned American dollars.

Social security as we know it now serves no point but to continue paying increasingly less benefits until it begins to run a deficit in the year 2017. (socialsecurity.org/quickfacts.html) This is no longer a social program, but a savings account with benefits for a certain percentage of the population. Vast numbers of hardworking people are paying into this fund, when it won't be there for them should they be unable to work or retire.

The average social security benefit in 2004 - 2005, was $895.00 per month, or $10,470 annually. While this may be helpful supplemental income, it is by no means enough for anyone to retire on. The poverty line is currently around $15,000.00, but we would expect our retiree's and disabled to live on 35% less than poverty limits allow. Most people now rely on another form of retirement, to supplement their social security. But when Social Security isn't even enough to cover most people's living expenses, why bother with the program at all?

As an example of Social Securities declining efficiency, in 1950 nearly 16 workers paid S.S taxes for every retired person receiving benefits. Today, that number is 3.3. By 2030, that number will be less than two. And of course, with less people paying per person, the tax rate has climbed from 2% in 1949, to 12.4% today. Yet, the average retiree draws less (adjusted for inflation) than in 1949, and begins collecting more than 10 years later.

This is quite obviously something that affects us all. We are all paying into the system, in hope of collecting as we age, or if we become unable to work. This is not guaranteed, however. The Supreme Court ruled in Flemming v. Nestor that there is no legal right to Social Security benefits. And therefore, you are paying a tax of 12.4%, under the assumption that you have the right to social security drawings. You, in fact, do not. No one does.

48 million Americans receive Social Security benefits, including 33 million retirees, 7 million survivors, and 8 million disabled workers. This is nearly 1/6th of our total population. Yet, Social Security faces an unfunded liability of 12.8 TRILLION. Trillion. With a "T". This is to say that with our current population, and with an expected rate of people collecting benefits from social security, the program is going to come up 12.8 Trillion SHORT by 2030. That's not an accounting error. Someone didn't forget to carry a one. The program simply cannot keep up with the benefit demand required, plain and simple.

And just one more thing on the dysfunctionality of the social welfare program that is Social Security. A medium income worker born after 1965 can expect a rate-of-return of less than 2% on his or her Social Security taxes. So, for examples sake, lets say you invested $100,000 (this is obviously a very low number, but it's easy to use for math purposes) dollars over the course of your investiture with Social Security. Your return is $2000.00. Lets take that same dollar figure, then, and assume you've invested it passably well in a private stock market, with a yield of about 6%. You've tripled your money, not to mention the investment boost you've provided for some company somewhere, stimulating the economy. This is a perfect transition into my next point.

The American public should be allowed to invest some or all of the 12.4% of their income, tax free, towards retirement. It is, after all, our money. Why should the government be making your investment choices for you?

A proposed solution, entitled "Personal Accounts" is so far, the best of the options on the table. In this proposed solution scenario, earners in the American Financial System (that's you, the blue collar worker) can take up to 40% of their normal Social Security submissions, and invest them tax free, in approved investments of their choosing. This is better than the current system at several approaches. First, because the money is yours, you actually have rights of ownership. Much like a 401k, or an IRA, if you were to die, the money can be left to loved ones. Social security is a personal benefit, and does not carry over to a spouse or relative in most cases.

Secondly, you can invest it where you choose. If you don't want to sink your money into Bill's