Social Security

President George W. Bush is lying to the citizens of the United States of America when he says, "'By the time today's workers who are in their mid-20s begin to retire, the system will be bankrupt.” “So if you're 20 years old, in your mid-20s and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt.'" The truth is that while Social Security could use a tweak, it will not be bankrupt when Americans retire. But the president will say anything and do anything, because he wants to implement a plan that will cut benefits and leave American citizens paying 25% of savings to plan administrators. It's not stupidity, but greed at work in the white house.

Social Security is funded by a payroll tax. When Americans make wages, 6.2% is taken out of paychecks to go to Social Security and an additional 6.2% is matched by employers. This then stops after the first 90k of income for each person. In a perfect year, the Social Security beneficiaries would need exactly as much money as paid in taxes. However, most of the time, the amounts are unequal. When the baby boomers retire, they will require more money than the payroll tax generates, so to make up for this, the American government has years where it generates more in payroll taxes than it needs to spend on beneficiaries. This excess goes into a Trust Fund. The Trust Fund grows each time there is a yearly surplus. Later, when there are years where the beneficiaries require more money than the payroll taxes provide, the government can take money from the Trust Fund to make up the difference. But what does the government do with this money? It spends it. That is theoretically okay if the intention is to pay it back later, but that is not the government’s intention. The Bush Administration is saying that when beneficiaries require more money than payroll taxes generate, in 2018 or 2028, that they will not be able to afford it. This basically means that the Bush Administration is following a policy of ignoring the Trust Fund entirely. Rather than viewing excess money as going to the Trust Fund, they view it as going to the government, and then when the time comes, they will see the extra money that the beneficiaries needing as coming from the government, from cashing in bonds. So instead of paying American citizens back, they say that benefits instead need to be cut. The Bush administration applies payroll tax to the normal deficit, claims that the trust fund does not exist, says Social Security needs to be cut, and implies that the government isn't good for their U.S. Treasury Bonds anymore.

If we were to leave Social Security alone, by the time the now 20-year-olds retire, Social Security would still be viable, although benefits would be lowered by about 20-25% from what today's promised benefits are. That may not be great, but it's far, far better than what would happen if Bush had his way with the system. If we went with the “Bush Plan”, benefits would be cut by at least 50%. This is a horrible plan for retirees. Additionally, American citizens would likely be paying a quarter or a third of savings to financial institutions to "administer" accounts. Wall Street is salivating for this to go through because they would get a $1,000,000,000,000 windfall from the “Bush Plan”. Stock prices have already risen for several firms in anticipation of getting their hands into the pockets of American citizens. The other “solution” is to have private plans. But privatization of pension plans is a bad idea that has already proven to be a disaster wherever it has been tried! Britain tried privatization, which caused “savers” to get raped by "handling fees" of as much as 30%. In 1984, Maggie Thatcher used arguments similar to those Bush has used to push through privatization of Britain's old-age pension scheme, a plan similar to our Social Security. "Declaring the current program unaffordable in 50 years’ time, the administration proposes the privatization of a portion of old-age benefits. In exchange for giving up some future benefits, workers would get a tax rebate to put into an investment account to save for their own retirement.” The year was 1984, the nation was Britain, the government was that of Margaret Thatcher, and the results have been a disaster that America is about to emulate. Privatization fails wherever it is tried because of greed on the part of plan administrators. Bush goes so far as to lie about it to get American citizens to support privatization of retirement savings.

The fiscal crisis of Social Security is grossly exaggerated by its political enemies. The trustees in the 2003 Social Security Trustees' Report project Social Security balances forward for 75 years. Their report uses pessimistic annual growth assumptions of just 1.6%. Even so, the 75-year shortfall is projected at just $3.8 trillion or just 0.73% of gross domestic product over time. By contrast, the Bush tax cuts equal $8.7 trillion, or 1.68% of GDP over 75 years, according to Peter Orszag of the Brookings Institution, and new proposed tax cuts would push the cost to over $12 trillion. Using the Trustees' projections, if the Bush tax cuts were pared back by less than half, the