The complete dope's guide to Social Security
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
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
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.
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
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