Monday, March 07, 2005

Social Insecurity

No surprise that this has become the big issue of this election year, as George W. Bush must rally wary republicans to his banner (in spite of their big win) in order to begin the march against history. I say against history since Social Security is the last "third-rail" of elected politicians. Touch-it-and-die has been the rule, but since the success in tampering with other people's pork (such as Military Bases and Welfare), W. is going to give this a shot as his lasting domestic agenda.

It should be no surprise to the left or the right that this has come to the fore in national politics, as it has been the trillion pound gorilla in the room for the past decade. Every year, the baby-boom generation gets older and closer to retirement, and the workforce gets smaller. This is true in all facets of industry, not just old white collar guys, but even blue-blooded union employees can see this happening at their own jobs. The answer to the big question, what do we do about Social Security, is complicated because it is so obvious. Since its inception, Social Security has been a tax designed to take from the productive and give to the unproductive members of society. Whether it be to those who have retired or to those who are no longer capable of work due to accident or disability. The truth is in the details.

When it began, Social Security paid benefits upon reaching the age of 65. The workforce that began paying into it were no different than those paying into an annuity of a life insurance company. This is because the government never expected to have to pay them, since they would largely die off before becoming eligible for benefits. Not to mention the joke of disability. In order to qualify for disability you have to have had an accident satisfy three conditions: that it will cause the loss of productive work (defined as $700 a month in earnings), that said loss lasts more than 12 months, and that said disability could cause death. In practice, Social Security denies the first application for disability no matter what your claim, and thus only repeat filers have a chance of getting benefits. In other words, hire a lawyer. But don't worry liberals, if you do qualify, Social Security will wait to pay you for 6 MONTHS. I hope you don't have bills. The only smart thing to do would be to scrap the whole thing.

Unfortunately, the people have been very sensitive to the reduction or elimination of Social Security. Essentially, there are millions of registered voters within 10 years of receiving benefits who have now paid for them all of their lives. These registered voters are AARP members and they always vote. They are also most likely to cross party lines over an issue like this. They can, and will, punnish anyone that effects their benefits in any way, and are often the easiest to influence through print or media advertisement. How can you blame them? Even if they, like most of you, knew this Social Security was a joke, they aren't going to want the rug pulled out from under them. They deserve this money now since they have paid for all their forefathers to get it. It's tough to argue against them.

Solutions to a problem so severe are essentially impossible. The tsunami of retirees are approaching the coastline of young people at breakneck speed. Soon we will all be drowning in the wake of increased taxes, massively reduced future benefits, and likely increased age requirements to receive benefits. W's proposal to add private accounts are a tip-off to the governments plan, which will be to wean the public off of the idea that they will get the Social Security their fathers received. Is it already too late? Most likely. Social Security is expected to become insolvent when I retire in 35 years (yeah right, retire). Since the program is running massively in the red, even with major economic boom, the only way to regain the black status is tax increases or benefit reductions now, not in the future.

Tax Increases, also known as the Republican Party Split ammendment, would be disastrous for Bush. It would also be disastrous for the people. Already we pay about 7% of our income to FICA, but our employers also match that 7% out of their coffers. In other words, you are taxed 15% of your income already for FICA (since if he wasn't paying it to the FED's your kind and generous employer would give you a raise, right?) and an increase in that rate would be ghastly to the economy. If you paid 15% of your paycheck into a 401k from 18 on you could retire as a millionaire easily. Ask an old person if Social Security made them millionaires, and they will laugh at you.

Raising the maximum rate is a good idea, even though it is already at $95,000 per year in salary. Essentially, this means if you earn $400,000 a year (yes, you basketball bench warmer) you only pay FICA on the first $95,000 of your salary. Increasing the maximum would bring in more money, and largely punish the wealthier members of society who are also most likely to receive the full benefits anyway. After all, how many hard working, hard living, union fellas are going to make 67? Between cancer (exposure to noxious chemicals, drinking and smoking), overtime (increased stress levels raise the likelihood of heart attack and stroke), and dangerous work environments (check the jobsite fatality rates for mechanics and lawyers) these people are unlikely to receive their benefits. So why not allow those most likely to receive benefits to pay a little more? Well, I am reminded that the wealthy already receive far less in benefits than the poor, are taxed more heavily on their disburtions, and already pay far more taxes for everything else, so why should they be punnished. If anything, they have paid for their own retirement and the retirement of hundreds of others over the years.

Reduced Benefits are another option, but who is going to tell them? Not me, those old people can get pretty fiesty. No-one is stepping up to the line and asking for their benefits to be reduced (although the baby boomers probably should be) and until someone does, no politician is going to risk his political career volunteering someone to do so. Even raising the eligibility for benefits by one year is dangerous (search Hagel), so imagine the response to a large reduction in benefits!

So what to do? I think the American people should be able to divide the electorate and vote down the benefits of a group. The hippie generation perhaps? Or maybe its time to finally get back at the disco generation? 80's fans really drive you nuts? Maybe those grunge kids deserve a fiscal spanking? I really think that the final analysis just might show you that those of us more than ten years away from Social Security won't be receiving much of it. The only solution is to make a bunch of babies right now, and then hopefully they will all work and pay for our retirement. That might push the insolvency back another 30 years! By then, I'll be dead and won't give a damn anymore....

Right?

2 Comments:

Blogger Veritas said...

80's fans really drive you nuts?

Tell me about it. There's nothing that I can't stand more than somebody that listens to the 80s all the time. Cut their benefits first!

-Eric

6:04 PM  
Blogger ca-dreamer said...

Veritas? Reggin please! Is that really your screenname? Truth? Now I guess Clinton will go by the sn of Virtue....

I know the 90's generation don't expect to get benefits, so let's cut them out!

7:07 PM  

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