My last post brought to my attention the subject of Social Security. While many young people know the general concept of the plan, very few recognize the problems associated with it and the dismal future predicted for it. Similar to my first post, I want to first run through the basics of the plan before I get to my main point.
Social Security is a mandated supplemental retirement plan that was established in 1935 as part of Roosevelt’s New Deal. How does it work? Basically, the government takes a certain percentage of your paycheck every week and places it into the Social Security fund that provides benefits to current Social Security recipients. This has in recent years become a problem with some current workers, who complain that the system is unsustainable and that after paying into the system their entire working lives, there will be nothing for them to collect in their own retirement years.
Now on to what I really want to talk about, the many problems with Social Security that will soon endanger us and our loved ones. As millions of baby boomers approach retirement, the program's annual cash surplus will shrink and then disappear. Then, Social Security will not be able to pay full benefits from its payroll and other tax revenues. It will need to consume ever-growing amounts of general revenue dollars to meet its obligations--money that now pays for everything from environmental programs to highway construction to defense. Eventually, either benefits will have to be slashed or the rest of the government will have to shrink to accommodate Social Security.
There is also something they call the “trust fund myth”. This myth suggests that all of the Social Security surpluses since 1983 have been saved in a trust fund that will total $5.7 trillion by 2018. In the meantime, Washington is lending this money to investors -- businesses and individuals. In 2018, when the system first falls into deficit, these individuals and businesses will begin repaying this $5.7 trillion back to the federal government, and that money will make up all the program's shortfalls until 2042. This is wrong in one critical area. Not one cent of Social Security's surpluses was ever lent to businesses or individuals. Think about it: Has anyone ever heard of getting a loan from Social Security? The surpluses were actually lent to the U.S. Treasury. The Treasury then spent this money on regular government programs like defense, education and welfare. So it is the Treasury that owes the Social Security trust fund $5.7 trillion. And where does the Treasury get its money? Taxpayers! It is the taxpayers who will have to repay the Social Security trust fund $5.7 trillion beginning in 2018.
When I was younger my dad once said to me, “Don’t come to me with problems, come to me with solutions.” He always taught me that you shouldn’t critique something unless you have another option. And sadly, in this particular situation, while I just wrote an entire blog entry on the problems with social security, I do not have a possible solution to the problem. It kills me to rant on how the system doesn’t work rather than how to make it better, but I also believe in the importance of education. While I may not know how to fix it, I want to teach others about the subject so that the word gets out and maybe someone out there will come up with a solution!
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