Social Security : Dealing with the Elephant in the Room

It's a Ponzi scheme.

Everyone has an answer and everyone also has a stake in what that answer should be.
Did you crunch the numbers of (Do not mean to start WW 4 with this ) Military retirees too. Serve 20-25 retire at 40 and live to 82 and collect full retirement and medical even tho you took another job and have a Soc Sec and private retirement from that too. Double and triple dippers who will fight tooth and nail against anyone who even suggests 'means testing'. One of my old bosses was a multi MILLIONAIRE yet she counted down the days til she could file for her early Soc Security. Many of our elected officials are drawing it too even tho they have high paying JOBS in government and are in their 70's and 80's!
There are many ways to look at this problem and the solution the government has chosen is to NOT look at it. basically it was a widows and orphans plan that got out of hand and here we are.

Personally, I believe the only way we as a nation could be weaned off the Social Security system is if we were to set a date certain upon which those citizens under the age of 16 could decide whether they wish to participate or have money redirected toward another type of savings plan. Naturally, this would need parental permission and a legal contract which can not be rescinded without going to court and reversing the decision.
I still believe money should be mandated into a savings account for retirement.
Then again, if these people place these funds into the stock market and we have a crash, they could end up destitute and end up on Federal support in any case.

Tad,

You're right, it should not be reformed only the real reason is that it does not need it! All it needs is funded and that is a simple matter. There should be no means testing. It was started for everyone to pay in and everyone to receive and needs to remain that way. The limitation of contribution of the high earners needs to be lifted.

As the average age of survival has changed, so too has the wage structure changed, with many having wages well over the $110,000 ceiling currently in place. Someone who has paid into the system for life has purchased his or her share of the system, whether they were fortunate enough to have significant other money or not.

Means testing and not paying everyone are methods of trying to kill Social Security. Turn it into a charity and it will die! That is why it was not set up as a charity but as an insurance. We need to keep it an insurance by all standards, as it has been since its inception!

Lifting the cap on earnings subject to SS contributions would solve most of the funding shortage. An additional half percent increase in contributions would make up the difference to properly and fully fund Social Security for the forcastable future and I believe that is considered to be seventy five years. We could also increase the interest the SS fund charges the federal government to borrow SS funds as they have been doing with a pittance for interest, since its inception. It does not take a rocket scientist to figure out a simple solution to the funding of a great program!

Social Security was never intended to b a full retirement but to keep the elderly who had nothing from starving and to supplement those who had some personal saving or pension. And to provide a minimum to those who lost a father and need that insurance to live.

This is the most successful program ever implemented by our government and has fulfilled the purpose and intent for over sixty years! Let's get rid of expensive programs that have failed to accomplish their goals and keep our successes! It's a simple test, does the program work and is it efficiently handled. Social Security is a rousing yes on both of these! I wish such a test were applied to all government programs.

I presume, Tad, that you are fairly young. And I can assure you that Social Security will be there for you when the time comes and if you do not need it for disability earlier.
My youngest son is thirty six years old and he will get Social Security! So will you.

Ape,

Originally, one of the goals of Social security was to eliminate the poor farms. It did that. It was never just a widows and orphans program. Go back to the writings and commentary from the time it was implemented and you will se that it was intended for all working persons. Were it established as a charity there would have been many needy and deserving person who would have gone without rather than accept charity. So it was set up as a totally separate thing and supported by worker contributions rather than general tax money. The original intent was for the contributions to gradually increase until sometime in the sixties it would be at ten percent and remain there from that time on. Politics got in the way! But the disability and bereaved payments were never more than a small portion of Social Security.

Richard,

What you reference is Social Security! If a certain portion of each workers pay is withheld as a contribution it required no contract. Of course, it would be always matched by the employer as it has always been. Investment in the stock market carries the risk of little to no gain if the market turns sour. Hence, the current amazing disappearing 401K that we have currently! But what goes up can always come down.

To charge the federal government a more reasonable interest rate than is currently allowed would go a long ways to eliminating the projected shortfall.

Again, it is a program that works and accomplishes what it was intended to do! Not too many government programs can claim this. Keep the ones that can meet that test and eliminate instead, those that fail that test.

The original intent was for the contributions to gradually increase until sometime in the sixties it would be at ten percent and remain there from that time on.

No the original intent was for it to max out at 3% for each employee and employer.
1935 Social Security Act

Also, social security wasn't for everyone. Note the exclusions (including agriculture).

"The term employment means any service, of whatever nature, performed within the United States by an employee for his employer, except- (1) Agricultural labor; (2) Domestic service in a private home; (3) Casual labor not in the course of the employer s trade or business; (4) Service performed as an officer or member of the crew of a vessel documented under the laws of the United States or of any foreign country; (5) Service performed in the employ of the United States Government or of an instrumentality of the United States; (6) Service performed in the employ of a State, a political subdivision thereof, or an instrumentality of one or more States or political subdivisions; (7) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual."
1935 Social Security Act

"Let's get rid of expensive programs that have failed to accomplish their goals and keep our successes! It's a simple test, does the program work and is it efficiently handled."

Social security is our most expensive program. It is not currently sustainable:
"• In 2017, benefits and administrative expenses are first expected to exceed tax income; to continue full
payment of scheduled benefits, the program would have to begin drawing upon trust fund assets,
although initially it would be sufficient to draw only on current interest income.
• In 2027, total program income (including investment income) is expected to be less than total program
outgo, thus requiring redemption of securities held in the trust fund and drawing down the
dollar level of trust fund assets.
• In 2040, the Social Security trust fund is expected to become exhausted—that is, all accumulated
assets will have been used up—and tax income alone will not be sufficient to pay benefits in full."
Financial Status
of Social Security

Mike,

The "intent" and what was written into the bill are two different things. The intent was for a cap of ten percent. We'd not have any problems had that been met!

Mike,

Mostly true! In 2017 it will be necessary for the SS fund to start collecting back the funds loaned to the government. It will not be "out of money" until 2042. At which time they could still pay out 70% of full amounts. That, of course, is if nothing is done in the meantime to balance things out.

There is a crying need to eliminate the cap on earnings subject to SS contributions. That and a 1/2 percent increase on contributions would solve the problem totally. Why look farther? Also, increasing the interest on what SS loans the government would alter the picture significantly.

Other things will probably be tried such as raising the retirement age but the two actions I've named are simple, relatively painless and will do the job!

None of this negates the fact that the program has been very successful and has done a much needed and critical job. Let's keep it going! Many other programs have failed to accomplish what they were intended to do.

Mike,

You are correct that not everyone who worked was originally covered under Social Security. Farmers were brought under it when I was young. Since they had to make a profit to get in on it, it was amazing how many farmers started showing a profit for the first time in years! The additional people who have been brought under it have contributed just the same as the original ones, it is only a matter of fairness and equity that they finally became covered. It was hardly fair that persons employed by agriculture, for instance, could starve to death in their old age. That was recognized and corrected.

And keep in mind that Social Security, regardless of how expensive it may be, is not supported by taxes but by contributions on the part of the employer and employee. How many other government programs are self funded? Especially the military!

The need or expense is not going to go away unless one can countenance the idea of our elderly and disabled being left to rot and most people don't want that. It is scarcely the hallmark of a civilized nation!

"In 1940, the ratio of payees to recipients was 300 to 1. Ten years later, the ratio dropped to 16 to 1. At the dawn of the 21st century, it became 3 to 1. In only a few more years, it will fall to 2 to 1."
Article

2042 is a conservative estimate. If our birth rate continues to drop that date will move into the mid 2030's. Estimates show we need to raise the rate from 12.4 to 15.6% for sustainability.

Also, increasing the interest on what SS loans the government would alter the picture significantly.

Which would be offset by increased national debt.

If it's such a successful program, why must people be forced into it? I would gladly take my chances of starving to death, rather than be in this horrible program.

The need or expense is not going to go away unless one can countenance the idea of our elderly and disabled being left to rot and most people don't want that. It is scarcely the hallmark of a civilized nation!

That is what welfare programs are for.

Hmm, I never realized many of those statistics. Thanks for posting.

OK thanks all for the replies, I will try to get back and post detailed responses to some of them tomorrow.

My sister paid all her working life into social security. She died at 52, and never came close to collectng. Lots of these types of cases can be found. Were these kinds of cases inculded into your classes experiment?

I don't go for raising the retirement age.There's something inherently evil about the plan to take money out of a persons check, with an age for retirement set, to where they cannot collect. Very premedited to keep taking peoples money, and then plan to have them die to early to collect.

My mother-in-law died one month before she would have begun receiving her first check, as well.

My Dad only collected a year before he died, and my Mom never collected.

If the program sets an age of retirement, knowing it will not have to pay, then why keep paying into this system?

Mike,

I appreciate your comments! We obviously have different opinions of Social Security. I've watched it work successfully for the past sixty five years and have been pleased with it as a program. The poor farms are gone. The elderly have at least a minimum amount to sustain life that they might not have without it. There is always going to be some form of system whether they call it Social Security or not, it is essential to a civilized nation.

The US system is actually inferior to that in several other nations but it is our system for better or worse. We can improve it or we can try to starve it to death in the hope that we can destroy it. But it will resurrect because it is needed. As will Medicare.

I won't challenge the figures on the number of payers. It was known at the inception that the number of payers per retiree would drop over the years so this is really irrelevant to the discussion. The only real question is, are we going to fund it or not? It would not require the amount of increase you have indicated. If no other steps were made the estimates are that I have read, a one percent increase in the contribution would completely solve the problem. The increases you mention are divided up between the employee and the employer. The increase you calculate amounts to a 1.6% increase for the employee and the matched amount for the employer. It's damned well worth it!

But that is the extreme scenario. None of the estimates I've read ever exceed 1% increase. These can be bandied about all day but the fact remains these involve no other effort such as raising the cap or increasing the interest. And leaving the retirement age alone, which I believe is proper. Though people are living longer, their ability to work is still deteriorating severely after about sixty five.

Increasing the interest rate charged the federal government might increase the national debt. But so does borrowing from China, does it not? The money in the social security fund is a dedicated fund for one purpose only and that is to fund the benefits of this insurance, bought and paid for by the recipients. It would require a legislative action to change the interest rate and that may never happen for that reason. But if it does not, then the government is getting a super deal on the funds they have borrowed. That benefit to the general fund from the Social Security fund should be recognized as it has helped keep the national debt down and the deficits from showing what they really are!

Your expressed concern for the national debt is incongruent with the fact that you would promote the use of welfare for the persons needing it instead of Social Security. Welfare is paid out of tax dollars and not from an independent fund and therefore increases the national debt as well as the deficit.

All the talk about a "lock box" is just that , talk. The fund cannot leave the money set in something where there is no interest or the manager's mattress. The SS regulations allow the fund to be borrowed by the government and set the amount of the interest. The whole thing is changeable and negotiable. But there is an ethical commitment to every person who has paid into the fund to insure that it will be there when they retire or when they become disabled or die. It is a clear contract between the worker and the government and if money has changed hands is no longer up to question.

Anyone who falls for the idea that they can "keep their money and invest it as they choose" is deluding themselves. If there is no SS the taxes will increase to get that money. And, left to the individual, the vast majority of people will arrive at the age where they can no longer work and have absolutely nothing! This is a widely known and ancient fact of human nature. If the workers can touch that money before retirement age, they will! Now we are back to welfare as we won't have them starving to death in our nation. If someone wants to alter the values of this nation to put the elderly out on an ice flow and get rid of them, so be it. But the America I know and love would never consider that.

It is strange that people who would consider assisted suicide for terminally ill people needs to be outlawed in all states, but the idea of many persons dying of malnutrition is an OK factor!

Dorothy,

Obviously, your dad an mother were gone at an early age and in that they were unfortunate. In contrast, my parents both lived to 91 before dying and drew Social Security for a lot of years. Mother never really drew a regular check until she was 70 because she was still working. And back then, any thing one earned reduced their SS check. This deduction no longer exists after one turns 65. She would always get a check for whatever she was eligible at the end of the year. I have known, over the years, literally hundreds of elderly persons who's lives are possible because of Social Security. If you become injured or your husband if you are married, you could easily be one of th people for whom the program is essential. And be very glad it is there.

At present, most people who apply for Social Security are dead by the time they hit seventy seven. So the intent is not to deprive them until they are dead by any means. My father in law had a stroke when he was 57 and was able to draw a tiny check for the next three years he lived and it was essential to keeping the two of them alive! She couldn't work because he required constant care. This is one of the reasons social security exists!

You have my condolences on the untimely death of your parents!

James,

I also think civilized societies provide a safety net for its citizens (welfare programs). That is difference from our Social Security system which has been morphed into a failed mandatory (for most of us) retirement program.

You say that you won't challenge my numbers then you say they are wrong? It doesn't make that big a difference anyway. The numbers will change as a bunch of assumptions turn out to be wrong.

SS is also paid out of tax dollars (payroll taxes). SS funds are used to purchase Treasuries which change rates frequently. Who do you think pays the interest for the Treasuries?

the vast majority of people will arrive at the age where they can no longer work
What age is that? 65?

bought and paid for by the recipients

Actually it's payed for by those who haven't received benefits. SS relies on current workers to pay for current recipients. It also relies on people to pay into the system and die before getting benefits from it.

Now we are back to welfare as we won't have them starving to death in our nation.
Your reasoning seems circular to me. If people aren't forced to pay for a system to keep people from starving, then they will be forced to pay for a system to keep people from starving.

Mike,

For most people the inability to continue to work is around 65 although there are notable exceptions like Harry Smith, if you remember him, picking fruit at 113! I personally worked to 66 thought I was eligible for full at 65. I thought for a bit of going to 70 but elected not to and today, at 70 realize I could not have done my job in an appropriate manner till 70 due to the changes in health.

And I didn't work at hard manual labor, I was in management. I am in much better health and shape than many persons my age. My father in law had to start drawing at 57 but it was tiny and he only lived three more years. He had strokes. I've known so many who could not even last to 62 and desperately need that insurance!

\\\\SS is also paid out of tax dollars (payroll taxes). SS funds are used to purchase Treasuries which change rates frequently. Who do you think pays the interest for the Treasuries?
////

An error here, the Social Security funds are dedicated contributions to the SS fund only and cannot be diverted for other purposes, the fund owns them. Tax dollars are free for all to go as desired. Yes the Social Security fund lends them to the government but cannot, by law give them. So it is not tax dollars. The rate of interest on the securities is fixed by statute according to the SS administration.

\\\\Actually it's payed for by those who haven't received benefits. SS relies on current workers to pay for current recipients. It also relies on people to pay into the system and die before getting benefits from it.////

All retirement systems have some people die before they can collect! Hell, even savings can have people dying before they benefit. If you have a way to prevent that, we'd all like to hear about it! But this is one of the reasons for continuing the system, we owe it to those who are a short time into contributing. And we will maintain it! BTW, right now, we are still using certain funds that I and any others have already paid. That means it has been purchased. That will change. But we are quibbling over minute matters of little consequence in the entire picture.

\\\\Your reasoning seems circular to me. If people aren't forced to pay for a system to keep people from starving, then they will be forced to pay for a system to keep people from starving.////

Exactly the point I was attempting to make! You were concerned about raising the interest rate on the securities held by the SS system because it would raise the national debt but favored paying welfare to all those who needed it, which would increase the national debt! That is indeed, circular thinking and I was trying to point that out.

I would point out that voluntary programs sound nice and very idealistic. They simply don't work! Regardless of how nice they might sound. How about "voluntary" taxes? Tain't agonna happen, Mike! And any program to be planable and workable must be also compulsory.

We can debate till hell freezes over, the cost of the program or it's compulsory nature, the retirement age and many other things. But did the program accomplish that for which it was implemented? A resounding yes! And is it an efficiently run program. Again, it is a yes with the SS, along with Medicare, being one of the best run and most efficient in the entire government. That is scarcely debatable but is simple fact. One needn't like the program or even approve of its existence, but it has worked well, beyond all anticipate hopes!

I'll bet they don't let you or I make any of the decisions on this, what do you think?

Thanks for the comments, Mike!

James said: "You're right, it should not be reformed only the real reason is that it does not need it! All it needs is funded and that is a simple matter. There should be no means testing. It was started for everyone to pay in and everyone to receive and needs to remain that way. The limitation of contribution of the high earners needs to be lifted."

To me, that's just throwing more good money after bad. As I said in my article, even when the system works as intended, it's a horrible deal for people in it. You'd be better off hiding your money in a jar and ONLY taking the inflation hit, compared to the damage this system does.

"As the average age of survival has changed, so too has the wage structure changed, with many having wages well over the $110,000 ceiling currently in place. Someone who has paid into the system for life has purchased his or her share of the system, whether they were fortunate enough to have significant other money or not."

Sure...lots of people make over $110K...but a lot of that is inflation. REAL wage growth has not kept up with REAL longevity. Changing the wage structure, lifting contribution limits, etc etc is akin to rearranging the deck chairs on the Titanic in my estimation.

"Lifting the cap on earnings subject to SS contributions would solve most of the funding shortage. An additional half percent increase in contributions would make up the difference to properly and fully fund Social Security for the forcastable future and I believe that is considered to be seventy five years. We could also increase the interest the SS fund charges the federal government to borrow SS funds as they have been doing with a pittance for interest, since its inception. It does not take a rocket scientist to figure out a simple solution to the funding of a great program!"

By "fully funding", do you mean the 10% contribution total you listed previously? And I assume you'd also expect the employer to continue to match? And also matching the additional half percent you propse? So in other words, 21% of the wage earmarked by the employer to the employee would go to this system? Again, I would be aghast at that idea, because it's throwing good money after bad, NOT TO MENTION making our businesses even more uncompetitive in the global economy. As I outlined in the article, it's bad math. I'd much rather take a 21% raise and take responsibility for my own retirement, thank you very much. Too bad we aren't given that option.

"Social Security was never intended to b a full retirement but to keep the elderly who had nothing from starving and to supplement those who had some personal saving or pension. And to provide a minimum to those who lost a father and need that insurance to live."

People these days are fully aware of the need to take care of their own retirement because, as you say, SS won't do it -- EVEN if it does work as advertised, which as it stands now is not going to happen. As for preventing people from starving, if we all got to keep more of the money we earned, our already high charitable giving would also be higher - old people wouldn't starve in this country. There are much better ways than this program. Again, Social Security is bad math - pay-as-you-go is the worst imaginable way to set up a system of this nature because it fails to take advantage of compounding interest.

"This is the most successful program ever implemented by our government and has fulfilled the purpose and intent for over sixty years!"

If that is indeed true, a more convincing argument for laissez-faire libertarianism has never been uttered. Unless of course you'd like to try to dispute some of the figures or assumptions I've made above, which from my vantage point you haven't done.

"Let's get rid of expensive programs that have failed to accomplish their goals and keep our successes!"

I agree... but our disagreement lies in what we define to be a "success" and what we don't. To me, forcibly confiscating 13% of my income (sorry, employer matching is money they're spending on me, so it counts) and giving it to me when I retire at a substantial loss is not my idea of a "successful" program.

"It's a simple test, does the program work and is it efficiently handled. Social Security is a rousing yes on both of these! I wish such a test were applied to all government programs."

I wish it were too... we'd have a government that much more closely matches the one outlined in our Constitution. Again, however, we disagree on whether SS "works" or not.

"I presume, Tad, that you are fairly young. And I can assure you that Social Security will be there for you when the time comes and if you do not need it for disability earlier.
My youngest son is thirty six years old and he will get Social Security! So will you. "

I can only hope and pray that you are very, very, wrong on that one. :)


Also, I saw you mentioning the Social Security trust fund. You realize this is nothing more than an accounting trick, right? Our federal government is $10 TRILLION dollars in debt. We don't have a vault sitting somewhere with a stack of cash in it earmarked for SS. It's just an accounting trick. It's the left hand of our government owing the right hand money (with interest payable to itself, I might add). It only exists because Bob Dole said it did when he "saved" social security 30-ish years ago. It's meaningless.

Dorothy said: "My sister paid all her working life into social security. She died at 52, and never came close to collectng. Lots of these types of cases can be found. Were these kinds of cases inculded into your classes experiment?"

Yes and no. By using the statistical life expectancies, we're taking into account people who died early, at the same time as people who live to be 120. The idea is that those cancel each other out. For every person like your sister who paid in and never drew out, there's another who drew out twice as long as average. That's the whole point of using an average.

Your family is obviously not the best example, but again, that's what averages are about. In a nation of 300 million people, there are going to be some that pay and never collect, while others will collect for a long time. That's true no matter WHAT you set the eligible retirement age at. But the AVERAGE life expectancy has increased since the inception of the program, and that's where (part of) the problem lies.

James said: "The need or expense is not going to go away unless one can countenance the idea of our elderly and disabled being left to rot and most people don't want that. It is scarcely the hallmark of a civilized nation!"

Obviously, I'm not suggesting that either. If you simply must have a government-run system to care for old people, taking 5% of their income and putting it into safe short term government debt at 1% is still a MUCH better return than the pay-as-you-go system. And goodness knows we have more than enough government debt to go around for everybody... They'd lose money in relation to inflation, but not NEARLY as badly as the current system. Remember I lost $250K in REAL (inflation-adjusted) money in my example lifetime. That's WAY worse than what this would be.

I would rather see it all handled privately, but that's certainly a compromise option I'd be much more comfortable with.

Tad,

Thanks for the detailed comment! Of course I have not, in your eyes, satisfactorily shown the superiority of Social Security. That would be impossible because your concepts are fixed and inflexible. You will say the same of mine and probably be correct.

But the fact remains that the program does the job intended! That cannot be taken away from it. We can debate the funding, the compulsory nature, the retirement age, the benefit level and such things all day as it makes no difference, but you don't see any poor farms out there in any country in the nation of which I am aware!

Your argument about letting the keep their money and having lots more after their working years falls on infertile soil! You may well have money and holdings but the vast majority, if they keep their money, will not have it when needed, and be welfare cases.

Regardless where it is invested, it needs to be compulsory and unavailable to the worker until either retirement or disability. Anything else will not do the job needed. And I certainly don't want mine dependent on the stock market! It could be great but we have proven that what can go up can also go down. Your experience proves that!

No, I was not referring to raising the contribution to ten percent, just a half cent more than current. And yes, the employer would match that half of a percent. That is where the biggest amount of objection to the entire thing is located. A half a percent to a worker is negligible but a half of a percent to an employer with a few thousand employees is a lot of money, no doubt about it.

I am not loosing money in the current system. Neither is anyone else. I might if I and my wife both dies prematurely, but that's breaks. And thought I won't receive the benefit, perhaps it will help fund the livelihood of a family who's father lost his life or ability to work and the kids are little.

\\\\I can only hope and pray that you are very, very, wrong on that one. :)////

I had just said that the SS would be there for you and my youngest son. You're hoping for a failure? Okay, if that's what you want. Sounds totally strange and self defeating to me but OK!

And telling me it is an "accounting trick". I thought the same not long ago. and it is true that there is no "stack of bills" waiting to be distributed. Nor would there be if it were invested in the stock market. But the securities are real and legally obligate the federal government to cover what they have borrowed and the interest. If that means raising taxes to do it the still must do it. Also, it will hurt as we approach 2017 that the slush fund of the Social Security contributions is no longer available to reduce deficits. It should have been figured in the deficit all along. That was an accounting trick!

You can scorn the securities but if they fail, our entire government has just failed. They carry the full force and weight of our nation. Tell me they will fail and I will tell you that the stock market will also fail at that point! Our government will be broke and I don't believe there is a precedent for this in a huge developed nation. Even the USSR, after breaking up into the member nations, still have such things as the pensions for the elderly. And I doubt any of them have a dedicated fund. If Social Security and its securities fail, you will be injured as badly as most everyone else unless you've put it all in gold and stuffed it in a mattress!

Again, it's a great program and very essential to our nation. It is a success and needs to be treated as that third rail it has been for years. One of its protections is the fact that virtually no politicians who espouses the destruction of Social Security can get elected.

It is interesting to see how differently we can see the same things. I'm for sticking with what works and you are basically looking for pie in the sky if you think that people will save enough for their old age. Most never are able, or choose, to do that. Never have and never will. But you don't see it in that light, thus differing opinions!

I don't reckon they are going to be taking much advice from either of us in the decisions made concerning the program, do you? I could do as well as Alan Greenspan. He was trying to hard to keep more money in the hands of corporations and failed to go far enough when he had the chance.

If we don't talk again before then, Tad, have a great Christmas!

James said: "Thanks for the detailed comment! Of course I have not, in your eyes, satisfactorily shown the superiority of Social Security. That would be impossible because your concepts are fixed and inflexible. You will say the same of mine and probably be correct."

Well, I agree and disagree. I can and do change my mind on issues, when I come across something that is powerful enough to do so. It's usually new data, either really new or just new to me. For example, when I was in High School studying the basics in Economics class, I became relatively convinced that the Swedish Socialism model was the superior form of economic and governmental planning. Needless to say, I don't feel that way any more. :)

But over time, as the amount of reading and research I've done has increased, and I've done some pretty in-depth research like the project in college I talked about in the article above, it does become tougher to do that. But there are recent examples too. When Greenspan was in charge, I was a pretty staunch defender of the Federal Reserve System, crediting it in part with averting recession after 9/11 and so on.

Of course, now I'm coming to see that in doing so, they inadvertently created an artificial demand for housing with the super-low rates. This brought in some less reputable "fly by night" mortgage companies doing some less than reputable deals - not doing due diligence on their lending practices and not even doing the basics like checking an applicant's employment or credit history. They did this because they had bought into a false sense of security that real estate prices will always go up forever. So they figured if they did a bad loan, the worst thing that could happen to them would be that they'd foreclose and end up with a more valuable property than what the loan was for. We all know how that went down. Assuming the value of something has nowhere to go but up, in spite of all the numbers and such, is always the first sign that a crash is coming. The .coms did the same thing. It's what Greenspan called "irrational exuberance".

Now, I'm still a big fan of Greenspan, I think he's the best Fed Chairman we've probably ever had. But I'm not convinced we should HAVE a Fed any more. There is no way any single person, no matter WHO they are, can see all ends in an economy as large and as complex as this. You can't blame Greenspan for trying to avert recession after 9/11 - he was doing his job. You can't blame him for the "irrational exuberance" of the people who reacted to his policies either...he has to assume people will behave rationally, or else it's impossible to plot any course of action with any certainty. Anyway, that's all off topic, but the point I'm making is that I'm not entirely inflexible in my ability to change my mind.

But in this case, Social Security is something I have done a lot of my own work in, and an issue I feel pretty strongly about, as you obviously do as well (just with a different paradigm). So it would take something pretty earth shattering for me to change my mind on this one. :)

"But the fact remains that the program does the job intended! That cannot be taken away from it. We can debate the funding, the compulsory nature, the retirement age, the benefit level and such things all day as it makes no difference, but you don't see any poor farms out there in any country in the nation of which I am aware!"

Well that's not entirely true actually...there are no "poor farms" in the literal sense, but there ARE a lot of elderly people in long term care (aka nursing homes) who ate through their life savings very quickly (that stuff is super-expensive!) and social security has no hope of keeping up with that expense. If not for Medicaid, they WOULD be in a "poor farm" or something similar. So it's Medicaid that's keeping them from that, and not SS.

I guess that I would concede that, for now while it's still solvent, Social Security does the job intended. But I would go on to argue that there would be MUCH better ways, and it does its job poorly and inefficiently. I would also argue that the problems it has that are created by demographic issues will only get worse over time. By that I mean that people (likely) are going to continue to live longer, and that our population is going to continue to get older, meaning more retirees being supported by a pool of fewer and fewer workers.

"Your argument about letting the keep their money and having lots more after their working years falls on infertile soil! You may well have money and holdings but the vast majority, if they keep their money, will not have it when needed, and be welfare cases."

Actually, I don't. I have 2 kids (one is 9 months old and was born 2 months early, only 2.5lb, so lots of medical expenses there), student loans, credit card debt, a big mortgage, and so on. So no, I understand what you're saying there. But at the same time, if my wife and I both got a 13% raise tomorrow because the government stopped taking out our Social Security tax, and my employer gave me their share of it too, those problems would clear up a LOT faster.

And yes, I am aware that if SS went away, the employer wouldn't give me ALL of their portion. The amount they'd keep, to get technical in economics for a while, would be a function of the elasticity of demand for labor in my particular field. Some employers would be able to cut out a lot of that, while other employers would have to give most of it to the employee in wages. The degree would depend on how replaceable that person is. But in all cases, that's good for everybody either way, because it would end up cutting prices on things as well on the other side.

"Regardless where it is invested, it needs to be compulsory and unavailable to the worker until either retirement or disability. Anything else will not do the job needed. And I certainly don't want mine dependent on the stock market! It could be great but we have proven that what can go up can also go down. Your experience proves that!"

I wouldn't want it in stocks either. Old people shouldn't be in stocks. But there are TONS of investments that are MUCH more stable and safe. And again, ANY of them would do better than the pay-as-you-go Social Security system, AND would avoid all those insolvency problems. There's no concern about demographics when everybody is paying into their own separate account.

"I am not loosing money in the current system. Neither is anyone else. I might if I and my wife both dies prematurely, but that's breaks. And thought I won't receive the benefit, perhaps it will help fund the livelihood of a family who's father lost his life or ability to work and the kids are little."

Yes, you are. Maybe you should re-read my example. The average person loses big, even if you factor out inflation. To quote myself from the article: "The average person in the class put in more than $250,000 more than they took out. " The average person. Not the unlucky ones who died young. Explain how that is NOT losing money?

"I had just said that the SS would be there for you and my youngest son. You're hoping for a failure? Okay, if that's what you want. Sounds totally strange and self defeating to me but OK!"

Yes, I am hoping for failure, and hoping for it soon, so I won't have to continue funding a broken system. There are many, MANY better ways to use that money. Even the government can do better than losing me $250K.

"And telling me it is an "accounting trick". I thought the same not long ago. and it is true that there is no "stack of bills" waiting to be distributed. Nor would there be if it were invested in the stock market. But the securities are real and legally obligate the federal government to cover what they have borrowed and the interest."

Yes, the federal government is legally obligated to pay it back...to themselves. With interest...to themselves. If someone else owed this debt, I'd agree with you completely. But the government owning it's own debt is like my left pocket owing my right pocket.

If invested outside of government debt, there'd be more incentive because there'd be some tangible outside entity as a creditor demanding payment. But even then, as the government, they always have an out of printing more money to cover any debt they need. As you may have noticed, they're getting better and better about doing that lately too. I hope you don't think that "bailout" of the banks and car companies is anything else? It's all going to end up as inflation, a weaker dollar internationally (which has also already happened over the last few years), and so on. Why do you think the price have gold has more than doubled in the last few years? And I think we all know who holds a lot of the foreign government debt too. Do you honestly feel comfortable knowing the Red China has that much control over us and our currency?

"You can scorn the securities but if they fail, our entire government has just failed. They carry the full force and weight of our nation. Tell me they will fail and I will tell you that the stock market will also fail at that point! Our government will be broke and I don't believe there is a precedent for this in a huge developed nation. Even the USSR, after breaking up into the member nations, still have such things as the pensions for the elderly. And I doubt any of them have a dedicated fund. If Social Security and its securities fail, you will be injured as badly as most everyone else unless you've put it all in gold and stuffed it in a mattress!"

No, I don't have a fear that T-Bills and T-Bonds and T-Notes will fail. You're misunderstanding me. That's not my point at all. My point is that when the government owns a stack of it's own debt, it's not "real" anymore. When I own a T-Bill, that's different. When they own it, it's an accounting trick. It's just moving numbers from one column to another.

"Again, it's a great program and very essential to our nation. It is a success and needs to be treated as that third rail it has been for years. One of its protections is the fact that virtually no politicians who espouses the destruction of Social Security can get elected."

That's a circular argument if I ever heard one. Just because there's a VERY powerful lobby protecting social security from change or abolition doesn't make it a good program.

"It is interesting to see how differently we can see the same things. I'm for sticking with what works and you are basically looking for pie in the sky if you think that people will save enough for their old age. Most never are able, or choose, to do that. Never have and never will. But you don't see it in that light, thus differing opinions!"

I never said any of that. You're making assumptions about me. :)

"I don't reckon they are going to be taking much advice from either of us in the decisions made concerning the program, do you? I could do as well as Alan Greenspan. He was trying to hard to keep more money in the hands of corporations and failed to go far enough when he had the chance."

I don't agree with that either. But I've been off topic more than enough on my own, without chasing that one. This may well be the longest post I've ever made. :)

"If we don't talk again before then, Tad, have a great Christmas! "

You too James. One thing I love is that we can disagree very strongly, but not be rude or angry about it. So many people on here seem completely incapable of retaining rationality for more than 10 seconds, and when rationality goes, civility soon follows. :)

Seeya! :)

Ape, military retirement has been reformed, those of us who are or have retired in the last 10 years or so will be the last to get what you think is a burden on the government. Unlike most of the political hacks and bureaucrats, many of those who served paid heavily in damage to health and financial growth because of our jobs while young.

I agree with you Tad, SS needs to go, its a simple ponzi scheme that politicians have used for a slush fund since its beginning. It is a huge burden on the budget and added to medicare/aid will crush it even if it suddenly becomes means tested. After all the Great Satan meant it to be a pension that forced dependence on government for people in the elder years. Once means tested, it'll become officially another entitlement/wealth transfer program.

If its so great why is it mandatory rather than voluntary?

Tad,

Thanks again for the response! I've certainly enjoyed comparing thoughts on this and always enjoy discussing differences of opinion with a civil and decent person. Neither of us is dumb enough to think there is a likelihood's of "winning" an argument here and can only hope to educated if only as to our own thinking. I always learn things and see new ways of looking at things I already know, so I profit from it.

I think we've covered our respective thoughts here fairly well and both of us feel quite strongly about it. That's what keeps it interesting!

Thanks again! I'll see you on another thread.

Charles,

I think you credit FDR and others frequently, with a level of thought an planning that never existed!

\\\\Great Satan meant it to be a pension that forced dependence on government for people in the elder years. Once means tested, it'll become officially another entitlement/wealth transfer program.////

FDR's only thought was to serve an interest and make himself look good! And when, in its entire history, was Social Security ever means tested? Or when was anyone who qualified by age and having paid in the requisite years, refused the benefit?

Hope you too, have a great Christmas, Charles!

Good article.
However, you left something out.
I was a stay at home mom, disabled now (but not drawing money for it)
What about the other stay at home mothers who worked their bottoms off, caring for children, parents ect. SS says I am not entitled to draw when I reach retirement ago because I didn't work enough years. BUT my ex put in for the 20+ years we were married. That was MY money too that went into the system. The court says I get half of what my ex will get but I doubt it. I was a corporate wife whose husband robbed her when he left. I suspect the SS adminstration will rob me too. That is IF it's still there.

I agree that it should go. A good money market, or investment program that you can move from job to job, would be very effective. Maybe using a Bond purchassing program instead of markets that can fail? The fact is that SS has become a piggy bank for the Government, and I can recall it going broke at least three times whem my grandmother was alive.
Now T.B. does bring up an interesting question on this, and I believe there would have to be a way to cover "stay-at-home moms". After all they do by all means work their buts off.

TB, your point is valid and well-taken, I fully agree that stay-at-home moms contribute mightily to the household in which they toil, and are undeservedly undercompensated.

However, the problem/flaw you point out is built into the existing system. In getting rid of the system, I'm not sure it would be reasonable to expect all the old problems with it to be fixed as well. Hopefully you can get help by other means, perhaps your state government and/or private charities?

At least, in my proposed fix, you would still be due half your ex-husband's take, assuming he's over 40 as outlined above...getting that from him would be a simple matter of court order, and the garnishment system already in place for other forms of compensation.

Hope that helps. :)

Hi Tad:

I wanted to acknowledge that I read your post. We are largely in disagreement. But I'm a little short on time at the moment. Perhaps later...

Well obviously, I didn't expect you to agree, but I do appreciate your reading it, and if/when you have more time, your comments are welcome!

Great post. I recently put up an article about SS as a ponzi scheme here.