Social Security
posted in General |SOCIAL SECURITY
Without a doubt, the Social Security program is the crown jewel of the American welfare state. Enacted during the great depression of the 1930s, it has endured great success and is “politically” untouchable. At least up until now.
Social Security is a cash transfer program. Payments (taxes) from those actively employed go in the front door and then are promptly paid to retirees or other beneficiaries out the back door. In the past and currently, there has been a surplus in Social Security funds which has been used for other governmental purposes. Within a few years, the surplus will vanish and be replaced by deficits – big annual deficits, calculated in the $trillions. The payment liability will greatly exceed the tax revenues being paid by active workers. Hence, the structure of the SS system will have to be changed. The variables include higher taxes, lower benefits, older retiremen age, or private savings accounts. George Bush is leading the charge for private savings accounts.
Gerge Bush can be accused of many things by his detractors (and some supporters), but he is not bashful about making major decisions. While many on both ends of the political spectrum cringe at the inevitability of changing Social Security, Bush is willing to tackle the issue head on. He fully intends to pursue the alternative of private savings accounts in which employes will be given the option of detouring some of their taxes out of the Social Security Fund into the individual savings accounts — like an IRA.
Some time back, President Bush talked about an “ownership” society — referring primarily to home ownership and investments such as 401K plan savings, IRAs, stocks and bonds. The SS Accounts would be another step along the road to an “ownership society”. This is not just another catchy term; rather, it has a lot of substance that will register with millions of Americans. I think George is on the right track. To be sure, during the recession of 2000 – 2003 people owning 401Ks and IRAs saw their investments suffer losses, but with the turn in the market they are on the way back up. Over the long haul – let's say a 20 year time span – the investment route will yield a lot more than Social Security will.
Because of the great change in demographics, a change in the SS system is unavoidable and will likely require increased Federal debt (borrowing) to keep the system going and satify the promises to older citizens. That is true no matter however the system is changed. But long range, the “ownership society” is the best route to follow for the country and its citizens – and the proposed change to private Social Security accounts is a constructive step along the way.
My guess is that George will start the process of selling the Social Security private accounts to people all across America in his State of the Union Address in late January 2005. A positive public response would be the best way to provide a bit of backbone to balky Senators and Representatives.