If It Ain't Broke ...
Let's be plain about one thing: This campaign, cooked up mostly by Wall Street investment houses and conservative Republicans,was always about “fixing” Social Security the way one "fixes" a cat.
The perpetrators employed what might charitably be labeled flapdoodle to scare soft-headed politicians, inattentive journalists and innocent citizens into thinking there's something fiscally out of whack with Social Security.
They proposed that the program be "privatized" instead. Rather than pay payroll taxes into a government fund in return for an inflation-indexed monthly retirement stipend guaranteed to the end of your days, they said, you should hold on to your own money and put it in the stock market. ...
The privateers claimed that the program was doomed to bankruptcy. They talked about how its surplus, currently $2.4 trillion, is invested in nothing but U.S. government IOUs. They didn't mention that those IOUs are U.S. Treasury bonds, which are the safest securities in the world.
They said that the program was going to run out of money in or around 2042. They didn't say that they were relying on a single estimate (among many flawed and contradictory projections produced by the program's trustees) forecasting that the Social Security trust fund would be spent down to zero by that date, or that even according to that projection the program would still have plenty of funds to pay benefits thereafter.
The "they" Mr. Hiltzig refers to are the same Wall Street types who, while amassing millions of dollars in bonuses for driving the stock market into the ground via fancy and imaginary investment vehicles, now see some new rubes ripe for the picking. You'd think that after the bear markets of 2000-2002 and the recent financial market meltdown which wiped out up to one-half of some 401k accounts, these robber barons would be slinking off to hire good lawyers, rather than pushing for another chance to work their scams. Unfortunately, you would be underestimating the depth of larcenous chutzpah in some peoples' souls.
Now, admittedly, the baby boomers are beginning to retire, and that means a lot of the Social Security trust fund will be paying out the benefits those workers paid for. Some kind of tweak might be helpful in keeping that fund operating at the current surplus level, a tweak that would'nt require the outright gamble on a market that even when not manipulated is chancy. Mr. Hiltzig offers a couple of ideas which might be workable.
...perhaps the time has come to put Social Security to even greater use.
One intriguing idea comes from David Langer, an 81-year-old professional actuary who has been a thorn in the side of the program's critics for years. (He exposed the flaws in the long-term financial projections in a series of actuarial journal articles in the 1990s.)
Langer observes that with termites eating away at two of the three traditional pillars of retirement security -- employer pensions and personal investments -- Social Security deserves a bigger role in most people's retirement.
He proposes a standard by which the program would supply up to 70% of a worker's average pre-retirement income, up from today's maximum of about 57%, which applies to the lowest-earning workers. He would finance the expansion partially from the program's existing surplus and partially by raising the ceiling on the payroll tax, which this year applies to earnings up to $106,800. He hasn't worked out how high the ceiling would have to be raised.
Langer also proposes allowing individuals to fatten their Social Security fund by paying in additional resources, such as their 401(k) balances. The program would set a conversion rate -- for every $10,000 transferred, say, you get a certain additional monthly benefit upon retirement or a discount on your future payroll tax. Employers could transfer their pension fund balances on similar terms.
Rather than completely rooting out this truly successful program, we should be working at giving it a larger role in retirement, one based in present reality, not in a future fantasy promised by such people as Bernie Madoff.
That's the only kind of change I would be interested in when it comes to Social Security.
Labels: Social Security