I recently heard that, in order to afford Bush’s tax cut, the Social Security fund may be dipped into. When I told this to my boss he laughed at me. He seems to think that the problem with social security is a myth made by the Democrats to make Bush look bad. He said that if Social Security went kaput, we’d be “like Russia.” According to him, if we were in such trouble, we wouldn’t be spending billions on foreign aid and such.
I’ll accept that the Democrats probably exaggerated the problem (which isn’t easy since I’m a Democrat.) But to what extent? There must be some crisis, or independent sources would’ve torn Gore a new asshole. Right?
Currently SS takes in more money than it pays out. The difference is loaned to the federal government to help pay for other goods and services or to help pay down external debt. In other words, the excess SS money is spent by the Federal Government. There’s no actual “fund” or “lockbox” full of money.
Nevertheless, some politicians have assigned a meaning to the phrase, “Dipping into the SS Fund.” Its precise meaning is simply, “Running a budget deficit.” While deficits aren’t desirable, they’re common. E.g., from 1950 to 2000, around 45 of those 51 years ran federal budget deficits IIRC.
“Dipping into the SS fund,” as defined, has only an indirect relation to the ability of the government to pay SS benefits. But, it sounds terrible, espcially for someone dependnt on SS.
I regret to say that not only have Gore and many other Democrats used this misleading terminology to attack W, W himself has also adopted the terminology.
The problem is, you can’t believe a politician. You probably knew that already.
Interestingly, Social Security was never meant to be a sole source of income for retirees, by the way. It was envisioned as a sort of economic ‘triad’ – personal savings/investments, employer retirement, and social security. Better than starving, huh?
It became more complicated in 1968, when, because of the economic as well as human bloodletting in Southeast Asia (Vietnam) The country was spending upwards of $90,000,000 a day on the ‘hostilities’; and President Johnson’s “Great Society” programs were his baby, and they, too, were extremely expensive. He didn’t want to back off on either, so his advisors found a way to cook the books by mingling Social Security revenues with the general budget, which hadn’t been done up till that time.
The entire program is based upon the tax revenues, squarely on the back of taxpayers, not surprisingly. When first implemented, there were 16 workers for every retiree. Now there are approx. 4; if current projections hold true then there will be 2~3 retirees for every worker in a couple decades or so. That’s the reality of social security. The demographics just aren’t there- It doesn’t matter what a democrat or republican says - at current rates, the country will either have to reduce benefits, raise taxes to an extraordinary level, or raise the retirement age. They have actually done all three already to some degree.
Alternatively, make current payments with inflated, nominally valued but purchasing power depleted dollars. What if your $782 Social Security check will only buy a typical tank of gas? It’s not inconceivable. There’s no way around it, but neither party wants to tell you that. Shh!
Here’s a relevant bit of reporting from the campaign trail:
Updated 9:54 AM ET August 22, 2000 By Randall Mikkelsen
DES MOINES (Reuters) - George W. Bush took a Texas chainsaw to the English language on Monday night. … he tramped the snows of Iowa and New Hampshire letting loose bloopers like a pledge to put “food on the family” and promising to place revenues in a “blockbox” for Social Security…
George made protecting the “social security surplus” a major campaign issue. Apparently W. has now reduced that promise to a “symbolic goal”. Many people took his father’s promise of “no new taxes” at face value, so it should not be surprising that many people are also taking this campaign promise seriously.
<< He said that if Social Security went kaput, we’d be “like Russia.” According to him, if we were in such trouble, we wouldn’t be spending billions on foreign aid and such. >>
Well, before its total economic collapse, Russia was spending billions on foreign aid, the military, and such…
Lots and lots and lots and lots of information and opinion about the issues of the future of Social Security can be found in the last few pages of the Linda Lutton on Bush tax cut thread.
Personally, I would prefer a choice of whether I would or would not even be a part of the Social Security system at all.
Show me a contract that says I can keep all of my money now and invest it as I want. When I retire I am on my own with no help from our government. At least I will know where I stand financially.
As far as I know there is absolutely no guarantee that we younger workers will even see the first SS check and of course no refund for the money that we have paid into the system.
I really don’t expect a dime from Social Security, it’s just a disguised occupational tax for the younger workers.
First off, the Social Security system is based upon the fact that nobody gets to opt out of the program. In extremely rare cases, just possibly, but in practice, no. Ponzi schemes fail because people fail to play along. The government, and Social Security doesn’t have that problem.
Second problem is, what happens to you in your own self-directed account when you put all your money in a failed Dot-com, whose shares are now worthless. Now what?
In many cases, people would whine, and the government would have to come in and bail you out again. That’ll never do.
And, by the way, despite what the OP implies, it is not the Democrats who are the biggest purveyers of gloom and doom. Yes, the Dems are saying don’t dip into the SS funds because we will need them in the future. However, it is the Republicans who are saying that we have to privatize social security in order to save it.
Most of the elderly people I know get pretty pissed off when they hear Social Security being termed an “Entitlement”, though. They paid into it, and receive relatively little back in return, adjusted for inflation. An entitlement smacks of welfare, basically.
Where it gets complicated for some people, or more correctly obscured, is the effect of inflation over the years. Nominally, the dollars paid into the program in the 1950’s or 1960’s had a much higher purchasing power than the dollars paid out in the 1990’s. It all looks good on paper, though, numbers wise.
The demographics are the key- there simply isn’t any way around it. I’m totally against privatization as well, for a number of reasons, among them the fact that Wall Street is foaming at the mouth to slop even more money from the public via brokers, and the market would have a difficult time absorbing that much money.
No, it will never actually fail; as the US government isn’t going to default on their debts. If they do, you have much greater problems than a Social Security check, believe me. The problem will be inflation, a hidden tax that robs all americans of their money.
It isn’t that you shouldn’t depend on Social Security in the future, just don’t expect it to pay for anything significant.
Yeah…But what happens if you lose all your investments in some krach? or if you don’t care and have invested nothing when you aren’t any more able to work? You can say now that you’re willing to take the odds. But you’ll probably change your mind if you’re actually facing hunger. And since the community won’t let you starve, you’ll eventually receive from the society though you never paid your share. That’s SS makes sense.
Correct me if I’m wrong, but are not the SS payouts adjusted every year using the consumer price index? (And, in recent years, there have been some claims…still rather controversial that the CPI may be effectively overestimating inflation.)
Actually, this is exactly how it is still talked about today, at least in all the literature I get from my company’s 401K plan. Another way to look at it is that SS is supposed to provide you with some minimum standard so you are not starving on the street in your old age. However, if you want to live more comfortably…travel…and generally take advantage of the free time in your retirement, you definitely have to rely also on retirement accounts (or other personal savings) and pension plans (if you get one).
The real problem is the dropping of the ratio of those paying in to those receiving benefits. Over time, IMHO benefits will be reduced. However, this change will be political dynamite, so I expect it not to happen until the very last minute – say 20 years from now.
