Tuesday, October 22, 2013

Saving Social Security

Some months ago, I wrote to the Congressman for my District concerning Social Security.  In his wisdom, he espouses a wish to save Social Security for future, as well as, current retirees.  He even asked for my opinion concerning which method I thought would be the best solution to the problem.  My knee jerk reaction is none of them.  Yet, all of us know that something has to be done or we will no longer have this fund.

Social Security is one of those programs that was implemented by majority vote, but which a vocal minority will probably be protesting until the end of life as we know it.  All Americans need to take note that our insurance program, meant to fund our retirement, is definitely in danger.  This is not a joke.  This is not politics.  It is fact.

The first danger is with funding.  With what we have in the fund to date, as well as withholding taxes at the current rate, we can continue as is until around 2033.  If we want to continue to collect beyond the next twenty years, some change has to occur or we will run out of money.

What are the alternatives being considered and why or why not choose them?

As stated earlier, some politicians are opposed to any programs such as Social Security.  They scream it is socialism even though all people who receive money from the program have to have held jobs and contributed a Social Security withholding tax from their paychecks.  Also, they collect their transfers based on the amount they contributed.  This is not taxing the rich to give to the poor.  A person doesn't work, said person doesn't collect.

The Congressmen who dislike Social Security are usually the same people that scream about Social Security Reform during every budget debate.  I see two alternatives for why they do this.  Either they are trying to delude us into thinking that Social Security is part of the basic budget and, therefore, needs to be cut; or they misunderstand how it is funded.  Horrible as the first possibility is, it is preferable to the thought that Americans would elect such uninformed people to represent them.  So, you need to evaluate on a personal basis.  Do you receive or hope to receive the Social Security you have sacrificed for after you retire?  If so, you need to inform your Congressmen as well as your President of your concern.

One point of view, especially prevalent during the last Bush Administration, is privatization of each individual's funds.  This means that whatever money we contribute will be held in a fund with our names and would be invested for (and possibly by) ourselves.  President George W. Bush said one time that he liked this idea because people want to leave something to their families.  People already have ways to do this.  They are called savings, investments, real estate and insurance.  The biggest flaw with privatization is that it takes more, not less, money from the Social security funds.  Therefore, it would cause us to run out of money faster.  There are other problems with this which I addressed in earlier blog articles at louhough.blogspot.com.        

Some Congressmen favor letting people choose whether or not to participate.  It is referred to as "opting out".    How would that be considered fair?  Were you allowed to opt out?  I sure wasn't.  Probably this option would be chosen by wealthy people because they think they will never need it.  I wonder though, how many suicides would have been avoided over losses during the Great Depression if people had been able to count on Social Security.  Besides, this is another example of removing money from a system that is already in trouble because it has too little money.  People really are determined to end the program, aren't they?

There is also the suggestion from some economics professionals that we raise the ceiling on earnings that can be taxed for Social Security.  I read somewhere that currently it is capped just above $160,000.  Some economists assure us that getting rid of this cap, alone, would solve the funding problem.

The everlasting solution of raising the age for full retirement again has reared it's ugly head.  For people who love their own jobs, this probably has a lot of appeal.  But folks, most of us don't get to earn our livings doing what we love.  For us, retirement comes as a blessed relief, a time when we can engage in our passions.  Sometimes when we can do this, we make greater contributions than we did with our work.  For my children, nieces, nephews, grandchildren and those adorable little great grands, I would not wish this option to prevail.

And now for the chained CPI most suggested in recent months.  Per my understanding they would reduce the cost of living adjustment downward based on substitutions.  For example, if bananas were expensive, but apples inexpensive, they would allow us enough to buy only apples.  Doesn't matter which fruit our particular bodies might need.  We don't already have to buy the cheaper fruits, vegetables, breads and meat cuts on our niggardly Social Security money?  We don't already have to shop the ads for the stores with the best sales, the ones that are offering what we need?  We don't already go without movies, cable, phones with aps, vacations, basic clothing?

Many Congressmen, as well as media experts, misinterpret the statistics for retirees.  They look at the mean, which can be skewed upward by the people who earn high dollar values.  They look at the median, which is simply the middle number.  They need to look at the mode -- the most frequent amount of Social Security transfers.  This is the figure that represents most of the people on Social Security.  I guarantee that the mode will not look as optimistic.

As you can see, there is no easy solution.  Whatever choice is made, some group is going to be hurting and probably bitter.

My recommendation would be to rule out privatization.  That will ruin a system we are supposedly trying to save.  Opting out should not be a choice either, for the same reason.

What might work would be a compromise between raising the payroll tax on all and the cap adjusted upwardly (though not eliminated entirely) and increasing the work years by one additional year.

You will note that I did not mention using a chained CPI.  As I said before, the Cost of Living Increment and/or the base to which it is added is already insufficient for most Americans to live the barest existence.  But the methods I've suggested at least keep funding within the Social Security System.

Congress must remember that for every way they devise a cut to retirees, they increase the need for Medicare and Supplemental assistance, Medicaid, heat assistance and Food Stamps.  Retirees on Food Stamps already represent over eight per cent of the age group.  Though Social Security itself is not a drain on the Federal budget, Food stamps and Medicaid concerns are.  How would that cut the budget?

People have to be able to eat, pay rent and have medical treatment.  (Or would the more stingy of you prefer to shuffle all retirees out to the pasture to starve in the cold)?  There have been primitive cultures who handled us this way.  If you do it to us, though, it will also happen to your parents, your children and other loved ones.  Or are you planning to support all of them yourselves?  What happens to them if you precede them in death?  Are you planning to split your estate among everyone you care about?  The individual amounts wouldn't amount to much, would they?

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