SamSaid!

SEEING AND HEARING

     As I became more and more aware of earthly events many years ago, I recall some words of wisdom passed along by my mother. She said, “Remember, none are so blind as those who will not see, and none are so deaf as those who will not hear”. I have no idea where these gems originated, but whoever coined them certainly knew what he/she was talking about. In a politically polarized America, they ring very true  –  especially when the subject is reform of Social Security.

     Our Social Security program is structurally unsound. Most politicos of  both parties will agree up to this point. We have an inter-generational  wealth transfer system in which grandkids are paying for the retirement of grandparents. But when it comes to making proposals for change, the water gets very murky. George Bush says we are driving down a road with a cliff at the end; the Dems assume the ostrich position and say “leave our New Deal jewel alone, and let's wait and see”. At least, George has a plan. The Dems do not.  

      Some of the numbers are not in dispute. When the System was implemented back in the 1930s, there were 16 contributors for each person receiving benefits. Now the ratio is 3:1, headed for 2:1 in just a few years. That   –  all by itself –  should set off alarm bells. But of course, none are so blind as those who will not see.  As impressive as those stats are, there is another set of numbers that play even a bigger role in determining how the System should be reformed. Back in the 30s, maybe 5% of Americans invested in Securities  — stocks and bonds. There are probably two big reasons for that. The first  is the Depression of the 1930s in which relatively few people were sufficiently affluent to be able to invest. The second was a great uncertainty about the stock market after the crash of 1929.

     Times have changed. The GI Bill produced an entire generation of better educated Americans. In addition, more and more people became aware of  financial gains thru different investment possibilities including savings accounts, CDs, Bonds and stocks. Now, about 50% of working Americans are stock holders who keep an eye on interest rates, stock prices, dividends and capital gains. The latest big surge in investments has come via IRAs and 401K plans. Even Union members have become mini-capitalists. Recognizing that the stock market is volatile and will have its swings, most investors are prepared to stay the course  —   willing to accept the risks.

     Risk and reward is no longer a bogey-man concept in the minds of most Americans.  It is a well recognized fact of life. Our Social Security Plan attempts to offer reward with no risk — as long as future generations pay the bill. And the rate of return on invested money as abysmally small. Geoge Bush's plan of including private accounts in the Social Security System in a bold proposal indeed. While it represents significant reform, it will not by itself solve the basic structural problem. But it is a step in the right direction, and with adequate explanation will appeal to those who have a basic understanding of simple investment math. The Dems say that the average American isn't smart enough to manage his/her own finances. I think they are riding the wrong horse.

     There is a chorus out there that sings the song of managing their own financial affairs. But none are so deaf as those who will not hear. Better listen up, Dems! Your foresight flunks the test and hearing is just as bad.