The Big Lie: Social Security

ETA: Almost as big a threat as Social Security are public and private pay-as-you-go pensions. See the terrible problems in: Illinois, Texas.

Social Security is the third rail of American politics. The Democrats want to make it Welfare 2.0. Republicans want to privatize it, as has been done in Sweden and Chile.

In fact, Social Security has run a 22-year “surplus” of over $2.1 trillion

Federal tax receipts are $2.5 trillion dollars out of a $14 trillion GDP. So let's not get all excited.

For example, as you can see above, in fiscal 2007, the government’s operational (”on-budget”) deficit was $343.4 billion; but after netting in the Social Security surplus and the Postal Service, it “officially” reported a deficit of $162 billion.

Funny, all the blogs I read say we have a $300-400 billion deficit. Not The New York Times, though. Funny.

No one, it seems, wants to privatize Social Security. The AARP said in 2005 of Sweden's private accounts, “The total return for the default fund was -10.6 percent in 2001 and -26.7 percent in 2002.” The Democratic Underground thinks it's all a clever ruse to commit theft.

The New York Times cries at the thought of private accounts. The Times also cries that Chile has trouble making private accounts work. Of course, if you read the article you discover that Chile requires neither the self-employed nor temporary contractors to pay into the system. The U.S. does.

Now follow this link to, if you please. You should be looking at a page ranking of 5-year CDs, from 5.25-3.75% interest.

Now ask yourself these simple questions:
  1. Why am I unable to deposit my Social Security into CDs and keep rolling it over?

  2. Why do we tax children and grandchildren to pay for their grandparents who, after all, worked all their lives and had 15% of their income taxed for Social Security? Were they really that incompetent at domestic finances?

  3. Why is someone who dies childless prevented from paying their Social Security benefits to a niece or nephew?

  4. Why has FICA gone up from 2% to 15%? (Don't forget your employer matches your payments exactly.)

  5. Why do we think that forcing everyone in the country to learn the stock market by giving them 401(k)s is efficient?

  6. Why do we regulate the entire stock market when we really only care about the life savings of little old widows?
Finally, let's talk about that “trust fund.” Social Security surpluses, by law, could not be invested in anything but U.S. Treasury bills. Treasury bills earn about 2.6% interest (half the return of banks). Finally, any money you get by cashing in a mature T-bill comes from the tax revenue of the U.S. government.

In other words, if we had kept the “trust fund,” we'd be paying off Social Security by — raising taxes. Without it, we will have to pay off Social Security by — raising taxes.

Again: with the fund, the SSA would cash T-bills, which the government would redeem by raising taxes. Without it, the government raises taxes and gives the money directly to SSA.

See the difference?