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The complete dope's guide to Social Security reform

Have you heard about the impending demise of the Social Security system? The issue began making headlines a few years ago when a poll showed that Gen Xers thought that they were more likely to see a UFO during their lifetime than ever collecting Social Security benefits.

The matter is mind-numbingly complex, and many reporters have already landed in mental asylums trying to explain the possible solutions to the problem. However, I've decided to risk insanity just to let you know that your chances of seeing your money again aren't as grim as they may appear.

Let Bill Gates pay for Social Security

The Social Security problem is the same one that you'll find in any hospital. There are too many old people and not enough cute nurses. Well, not exactly, but you get the point. The ratio of tax-paying workers to retirees is expected to decrease from 3-to-1 (in 1996) to 2-to-1 (in 2034), so there will be fewer people carrying a heavier financial burden. In simple terms, financial analysts have predicted that the system will run out of money by the year 2034 unless drastic reform takes place.

A group called Americans Discuss Social Security conducted a poll to find out what people think about the proposed alternatives to the current system. So far, only two of those proposals have received any widespread support from citizens: 1) Collecting payroll taxes on earnings above the current amount of about $76,200; b) Having individuals invest some of their own payroll tax deductions themselves.

Collecting additional payroll taxes is an idea as old as Robin Hood's "steal from the rich to feed the poor" scheme. The extra billions of tax dollars might even solve the entire situation without any further steps being necessary. While this solution is probably not fair to people who've accumulated a great deal of wealth, that really is not my concern since I'm still just keeping my head above the poverty line. When it becomes my concern, then I'll hoot and holler about how "The Man" is robbing me blind.

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My final thoughts on this proposal are best summed up by song lyrics written by the immortal Aerosmith:

"Eat the Rich:
There's only one thing that they're good for
Eat the Rich:
Take one bite now -- come back for more
Eat the Rich:
I gotta get this off my chest
Eat the Rich:
Take one bite now, spit out the rest."

Privatization: Pay now and pay later

So what about the idea of having people invest their own money? Conservatives are leading the push for privatization, which would involve setting up individual investment accounts for all taxpaying workers. Privatization advocates figure that Americans would be better off if they could give up some of their future benefits for the chance to invest a part of their payroll tax deductions in the stock market.

The idea sounds great in theory, especially considering how well the market has done in recent years. However, one of the problems with this proposal is that there are still many people who don't know the difference between a stock and stock car racing. What will happen to the people who don't invest wisely? Will the government (i.e., you and me) pick up the tab?

Another problem with this idea is that setting up all these accounts is going to be a very costly and lengthy process. Who would cover these costs? You and me again, pal. That means that we'd be paying for both the old fogies and our own individual Social Security accounts. Want proof? The Employee Benefit Research Institute calculates that an average man born in 1976 would lose more in net earnings if we choose privatization over tax increases.

The good news is that the privatization transition costs will be paid off by the time our children retire. Isn't that nice? At least we know that our little darlings will be well taken care of. Excuse me, but I'd rather they fend for themselves. I'm from the George Costanza fire drill school of thinking -- it's every man for himself when it comes to survival. Believe me, you wouldn't want to depend on my generosity when that last life raft is leaving the Titanic.

Don't believe the hype

Overall, the future is not as bleak as some news reports make it sound. A few experts are even saying that this entire mess would go away with some moderately faster economic growth. My point is that there's no reason to panic yet. Consider that we'll still have enough to pay 75 percent of everyone's benefits for the following 75 years, even after Social Security's trust fund is exhausted in 2034. That's not too shabby.

In a worst case scenario, we'll just have to raise payroll taxes for all employers and employees by 1.1 percent to cover any financial gaps. This doesn't sound like such a big deal to me. So stop worrying about Social Security because we've heard unmerited predictions of doom and gloom before. After all, the world was supposed to have ended when the millennium came, right?

-- Posted: July 12, 1999



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