Social Security or Social Insecurity?

Social Security is all trust and no fund. There’s no stash of your cash in an account with your name on it that nobody can touch. The money that beneficiaries get comes from the paychecks of their working children, grand-children, friends and neighbors. If you had private accounts, there would be cash in an account with your name on it. Therefore, Social Security is not a“social insurance plan” like it is described by some, but a welfare program that takes money from working people to give to retired people (who, by the way, must pay income taxes on a certain amount of the benefits received).

Just like Ponzi’s plan, Social Security does not make any real investments – it just takes money from later “investors” or taxpayers, to pay benefits to earlier, now retired, taxpayers. Like Ponzi, Social Security, in the future, will not be able to recruit new “investors” fast enough to continue paying promised benefits to previous investors (today and tomorrow’s retired seniors). Because each year there is fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi’s scheme. It is now estimated that by the year 2017 (or sooner if the recession continues), Social Security will be paying out more than it will be taking in. It is expected to become insolvent around the year 2040 or there about.

How long will it be before our elected representatives finally try to make Social Security a financially viable program so that future retirees will be able to count on receiving benefits during their retirement years? The most “politically incorrect” answer is what Pres. Bush tried to do a few years ago, after reading a report by the late Sen. Patrick Moynihan (D-NY) and former Sen. John Breaux (D-LA), who suggested using part of the payments, now being made by today’s workers into the present Social Security system, into private accounts that become the property of the worker, which can be passed on to his/her heirs upon death. It has been shown that over the years, a three or four times better return can be realized by letting people put some of their F.I.C.A. contributions into “blue chip” equities or debt instruments (AAA Bonds).

Even in today’s down market, a worker would be getting a greater return on his contributions than he would get from the present system, if he had a partially “private” Social Security account as described above (if it was setup 20 or more years ago). Yes, there is no 100% guarantee, but past experience, over the last century, has shown that it is most probable that a worker would be vastly better off with a partially privatized system, even taking into account the ups and downs of the market, through good economic times or bad. We must try something as the present system is going broke, just like Bernie Madoff’s financial empire which came crashing down. Even a “Ponzi Scheme” run by the government is not immune from disaster.

Written by Chuck Lehmann