Crisis Amnesia Syndrome
It’s happening again, political amnesia rampant in the liberal leadership. Recently it was the sudden lack of any desire to deal with Saddam Hussein that displayed this quaint condition to the public. A condition that so many in both parties seem to suffer from when not in power. Now it is the Social Security crisis, the very one that they themselves championed during the same years they were calling for the removal of Hussein, that they are claiming is an imagined one.
Let’ do what we did with the Iraq quotes in 1998 and go back to see what the Democratic leadership was saying about Social Security then. Taken from a Byron York article on the subject:
“We have a great opportunity now to take action now to avert a crisis in the Social Security system,” Clinton said, again in February 1998. “By 2030, there will be twice as many elderly as there are today, with only two people working for every person drawing Social Security. After 2032, contributions from payroll taxes will only cover 75 cents on the dollar of current benefits. So we must act, and act now, to save Social Security.”
In September, Vice President Al Gore went to the Capitol for a Social Security pep rally with congressional Democrats, including House Minority Leader Richard Gephardt, Sen. Edward Kennedy, Sen. Barbara Boxer, and others. Gore said that in coming years – by 2032 – “Social Security faces a serious fiscal crisis.” Everyone in the group stayed remarkably on-message as they warned that the future was dire.
“Save Social Security first,” said Gore.
“Save Social Security first,” said Gephardt.
“Save Social Security first,” said Kennedy.
“Save Social Security first,” said Boxer.
Some argue that he was just trying to beat away Republican attempts to give some of the imagined surplus back to the taxpayers, making sure to keep it in Washington where they could keep an eye on it for us, and that could very well have been his motivation. But he did have some of the facts right. A recent look at the issue at Factcheck.org shows us:
But the central point is quite true — demographic trends make it certain that the current system cannot be maintained without increasing taxes or cutting the growth of future benefits.
As recently as 1950 there were 16.5 workers paying Social Security taxes for every one person receiving Social Security benefits, according to statistical tables published annually as part of the Social Security trustees report. Currently, there are 3.3 workers paying in for every one beneficiary receiving benefits, and the situation will worsen dramatically when the post-World War II “baby boom” generation begins reaching age 62 — the age when many choose to begin receiving early retirement benefits — in about three years.
Within 15 years that ratio is projected to decline to 2.2 workers paying in for every one person getting benefits. And it is forecast to continue declining to 2.0 workers in 2040, when workers who are now in their 20’s reach retirement age.
That’s a pretty solid projection — All those who will receive benefits in 2040 have already been born and counted. Changes in projected life expectancies, immigration rates or birth rates could throw it off some, but not much, and not soon. The projection uses “intermediate” assumptions, but even under a “low cost” set of assumptions (birth rates 13% higher, improvements in life expectancy slow by half, and immigration increases 44%) each of today’s young workers would have only 2.4 workers supporting them at retirement in 2040. Either way, the system faces an enormous financial crunch.
And of course, to the rescue of the Democrats in not hesitating to mislead and outright lie in order to defeat this president in any way, Moveon.org has falsely claimed that the Bush plan will cut senior’s benefits in half. Just another “scare the old people” tactic that is used every time this subject or an election comes around.
The simple fact is that people who are in their middle to late 30’s would most definitely like to see a better return on their investment into a retirement plan that we would see with social security, and we realize that that can be achieved safely and securely in very low risk, long term investment into bonds and other secure investments.
How do we know it will work?
Over 20 years ago Galvaston County asked Rick Gornto to develop a plan to create a privately funded retirement plan with a life insurance and disability income component comparable to Social Security. In 1981 over 70% of the government employees voted to adopt it, dropping out of the Old Age Assistance and Disability portion of social security.
What did they get?
In Mr. Gorntos’ plan employees don’t worry about mutual fund choices. Instead, the plan manager pools the money and loans it to a major financial institution for a competitive and guaranteed return. The return has varied from 5 to 15 percent without risk to participants. Administration and record keeping are simple.
Although returns are lower than stock market returns, the benefits payable to retiring workers are generally higher than Social Security benefits. According to First Financial Benefits— the firm that administers the plan— a high-income worker (earning $51,263) would receive a lifetime income of $3,846 a month. That’s 90 percent of pre-retirement income. The same worker would receive only $1,540 a month (36 percent of pre-retirement income) from Social Security.
Low-income workers, who receive disproportionately high benefits under Social Securities’ benefit formula, also do better under the private plan. A worker with an annual income of $17,124 would receive $1,285 a month from the plan. Again, that’s 90 percent of pre-retirement income. The same worker would receive only $782 a month (54.8 percent of pre-retirement income) from Social Security.
Workers also have a choice. They can receive a lifetime annuity or they can take the money as a lump sum.
Disability and life insurance benefits are also better. Each worker has three years of annual wages in life insurance— a minimum of $50,000 and a maximum of $150,000. Merrill Matthews, resident scholar at the Institute for Policy Innovation in Dallas, told me of a judges’ widow who received $150,000 in life insurance coverage and $125,000 that had accumulated in the judges’ retirement account. She would have received only $255 from Social Security because there were no children eligible for Social Security survivors’ benefits. The widow would not have been eligible for full Social Security retirement benefits until she reached age 65.
Similarly, disability benefits are about twice as large as the benefits the same worker would receive from Social Security.
In fact, much of this plan and new changes and innovations to it can be seen at The Institute for Policy Innovation. They state quite clearly that Social Security *IS* becoming insolvent. In less than 14 years the system will be paying out more than it takes in. Why continue with a system so outdated and dysfunctional when we have better, more innovative and secure ways to provide better retirement plans to everyone at a lower cost to the taxpayer?
The Democrats, unfortunately, appear to be the party of “No Success That We Dont Create” instead of doing what it best for all of us. Instead of working with the current president to continue the call for saving Social Security that president Clinton first alerted us to, they are abandoning the cause now because a success in that area would support the opposing party instead of their own at a time when their hold on power has almost all but shriveled up. And they wonder why that has happened? Contrary to what they might think, the American populace is not as stupid as they are led to believe.