There is so much wrong information about Social Security and Social Security Reform and Social Security Privatization that even people who should know better are saying things that don’t make sense.
I will say this one more time: Social Security is not a savings account, it is not a pension plan; it is an insurance policy; it has no returns.
The fact of the matter is that Social Security will take in more money than it hands out in benefits until about 2018. Furthermore, the extra money that has been taken in over the years has been put in nice, safe United States Bonds and Treasury Bills. Yes, that’s right, the Social Security Administration owns a big chunk of the National Debt, and that’s not necessarily a bad thing. The Feds can’t default on this obligation without either defaulting on bonds held by private holders, banks or other nations, or by special, politically suicidal act of Congress. Either way, worldwide economic chaos would ensue. Yes, these bonds earn less over the theoretical long term gain in the stock market, but frankly that is irrelevant. Benefits paid are not linked in any way to performance of the trust fund. Putting the returns on trust fund investments into the argument is a big, fat, red herring. Aren’t you glad these funds haven’t been invested in the NASDAQ Composite for the last 5 years?
If nothing at all is done, there is still no problem until sometime between 2042 and 2052. Even then, Social Security would be able to pay something between 75% and 81% of promised benefits. For “flat broke” and “busted,” that’s not too shabby.
There is no consensus that major changes need to be made. Republicans are daring to ask for details before they pledge support. The religious right is threatening to link support of this to a Gay Marriage Ban Amendment. The AARP opposes major changes, perhaps because enough of their members remember why the program began: a stock market crash plunged the economy into a depression and wiped out many people’s retirement savings.
The idea that a Private Retirement Account would be “your” money to invest as you wish is being exposed as a lie. There would be an approved list of investables, and thus an approved list of Wall Street firms that stand to make a lot of money, particularly since we are talking sums of money that will initially fall under “small accounts” rules. So much for controlling “your” money. Seriously, if the goal is to have more people invested in the stock market, then increase the maximum IRA contribution, maybe loosen 401K requirements. Don’t pretend that a maximum of $1,000 per year, invested in much of anything, is going to provide a decent retirement. Even if you do manage to get 7% a year — which frankly involves a lot of really good luck, skilled investment choices, and no fees whatsoever — we are talking about a PRA nest-egg of less than $200,000 at the end of 40 years. (Note: this figure is from Microsoft Excel’s investment calculator). How long do you expect to live past retirement age? Ten years? More?
And no-one has yet answered the underlying question: If the problem is that Social Security won’t have enough money, how will giving it less money help?
President Bush has said there will be no benefit cuts, and maybe that’s true for the next 4 years. But then again, members of his administration said they knew exactly where Saddam Hussein’s Weapons of Mass Destruction were.
In closing, Fannie Mae Follow Up and Meat Packing Plants Aren’t Just Bad for Livestock.