Change can be good (Part I)

Social Security reform … to a degree I’ve stepped around this subject … I’ve wanted to wait until I had done some more research and had some more recent numbers to give you, but given recent discussion I think I should at least say something.

I’ll likely have more to say on this subject later, but for now I want to address some things that I’ve heard recently in the news. I don’t have exact quotes, nor do I know specifically who said them so I’m going to keep it to a discussion of the concepts and why, in my opinion, we are seeing the political opposition to Social Security reform that we are.

‘Social Security can run as it is for 50 more years … we don’t need reform’

First off the person that said this is spreading misinformation. There are laws in place that automatically kick in at points where the Social Security outflow reaches a certain percentage of the Social Security income … these laws automatically CUT benefits in order to maintain the system. Current projections show a 28% reduction in benefits within about 15 years. That is a 28% reduction from CURRENT benefits within 15 years … folks have you watched the cost of living? Do you think that the cost of living is going to go DOWN 28% in the next 15 years? I don’t.

Even if we take that cut in benefits out of the equation basically you have a politician saying ‘well it isn’t going to be a problem while *I* am in office, why should I bother to FIX it?’

‘There is no Social Security crisis; it doesn’t have to be fixed now.’

Okay … again ‘I’ll be dead by the time this is a problem, why should I worry about it? I’ll just let my kids or grandkids worry about it.’ Or ‘Sure the boat is taking on water, but I’ll be off it before it sinks why should I worry about patching up the holes?’

Aside from the sheer irresponsibility of such a statement, let us take a look back 8 years. What were then President Bill Clinton and Vice President Al Gore saying on the subject? Why, they were saying that Social Security was in a crisis and congress needed to fix it … problem was … no one could agree on HOW to fix it.

And now we get to the crux of the matter … HOW to fix the system …

You see … there’s the REAL problem. The left doesn’t want to fix the system now for a couple of reasons.

1) There is a Republican in the White House and the House and Senate are controlled by the Republicans. To fix the system now would be a feather in the hat of the Republican party and specifically for President George W. Bush.

2) George W. Bush and the Republicans favor a privatization option that the left doesn’t want to see passed.

Now, why don’t they just present their plan to the American people and let us decide which we’d prefer? Simple, really … their plan is to patch the system the same way they have every other time … raise Social Security tax rates and/or cut benefits to current recipients … and they know that this option is not going to receive popular support.

Recent polls show that a majority of Americans agree that Social Security needs to be reformed … most current American workers believe that Social Security will not be there when they retire.

Currently the system takes the money paid into the system and uses that money to pay those who are currently receiving benefits under the system. Technically any money that is left is supposed to be put into a trust fund. The trust fund, however, is a myth … the excess money from social security is siphoned into the general fund to help pay for various projects and an IOU is put in the file. … Sooner or later those IOUs are going to come due … and when they do Social Security will collapse.

Whether that day be tomorrow or 50 years from now doesn’t matter … if I know that a volcano is going to erupt and kill millions in 50 days should I wait till the day before the eruption to tell them or to start getting them out? No … that would be irresponsible.

Why are these people opposed to privatization?

Well … mainly because it reduces the dependence of the society on the government and promotes individual ownership and rights. It gives individuals a personal account with a guaranteed benefit upon retirement (or disability as provided under the plan) since this money was earned by the individual and they own the account the benefit can be willed to surviving family members in the eventuality of the individual’s death … before or after retirement.

I will be gathering together some more information and writing something up specifically about privatization plans and common criticisms by the media and the left.

But for now I will say, privatization is not just a theory … it has already been done. Chile modeled their Social Security plan after the US … and realized several years ago that it was a flawed plan and adopted a privatization plan in its place. Also, in the US, Galveston county and a few other counties in Texas opted out of Social Security through a loophole in the plan in 1981 (Congress closed the loophole in the 1983 Social Security reform act … which also cut benefits) … in both cases retirees are getting considerably more in terms of benefits than the plan they left would have provided.


A couple of pieces if you care to know a little more about privatization:

How Galveston Opted out of Social Security

Some Americans already have Privatized Social Security