Social Security: What’s The Problem?

Social security has been a subject of controversy within our annual elections, consisting of both truth and lies. The difference is hardly distinguishable… without the correct facts. This is the unbiased, authentic strained reality regarding the status of Social Security and the security of our monetary future.

Let’s start with a little background information. Old Age, Survivors and Disability Insurance (what Social Security is called by the government) receives its funds from withheld payroll checks since the Federal Insurance Contribution Act. On average, 6.2%-12.4% of a paycheck is taxed to support this program. Social Security used to be about payment plans that covered only the bare expenses for claims, but three decades ago the government saw the expected failure of this system and raised the taxes and reduced the benefits. This way, they figured, the system could build up a pecuniary foundation expansive enough to supply the upcoming overflowing generations’ retirement. Between then and now, taxes have only been raised and benefits have only been further reduced.

Any racial aspect regarding social security is based on the grounds of data collected by the CDC (US Center for Disease Control). According to their research, white males born in 1990 have an average life expectancy of 72.7 years, equivalent to seven years of Social Security collectivity. According to that same study, African American males born in that same year have the life expectancy of 64.5 years – which results in death a year before eligibility. Statistically, Social Security proves more beneficial for whites but this is all relative to life expectancy data and nothing more.

The Democratic approach, fronted by Obama, intends to raise Social Security taxes in order to solidify the system. The government will have to cooperate by subsidizing their budget to make this plan effective. The problem with this plan is that there isn’t a legal provision the government can pull outside of a bailout to use in order to subsidize. The Obama plan would increase the amount of debt held in Social Security’s Trust Fund for the future generations to assume responsibility of funding. Congress will have a larger budget, and promises to raise taxes that we will save money, but in reality money is being spent to support a budget deficit instead.

Remove the cap on income subject to SS (FICA) tax. The system doesn’t tax any income over $107,000 per year, this does go up every year. Making SS a regressive tax which means it takes a larger percentage of the income of low-come tax payers then high-income. According to the Congressional Research Service, the system can remain solvent for a few more decades if the cap were to be removed. That will not solve the problem that Social Security is currently facing it just gives us more time to push the problem off.

We can only lend money to ourselves with interest for so long, raising taxes will not solve the problem…

The U.S. Government collects money from us that it says it is saving to use for our retirement. However, instead of actually saving it as it leads us to believe, it writes an IOU from us (an IOU from the U.S. Government is an IOU from its taxpayers) to us. In other words, it takes our retirement money, spends it on a lot of stuff we don’t even want and forces us to take out a loan to pay it back to ourselves.

Let’s say you hired an investment advisor to plan your retirement and every year you handed him thousands of dollars feeling secure it would be there when you needed it. However, rather than investing your money he uses it to finance his wild lifestyle and stuffs your retirement account with IOU’s he forges your name on that are actually debts from you to you. Would you be mad? Would he go to jail (if you didn’t catch him first)? Well, that is exactly what the U.S. Government does with your Social Security money; in the private sector we call this theft, but for our government it’s business as usual. See the rest of the article by Paul McWilliams at to understand why investing in Treasury Securities can’t go on forever:

Well then, what’s the solution?

The Privatization approach

Anybody who’s heard of retirement knows the process: if we want to have money later, we have to save money now. Thrift in play, it has been obvious that the United States government has no way to stock up on funds in surplus of its debt. If we are going to save for the future, we have only two options – to forward the funds into private accounts controllable by the people for growth, or pass a law enabling the government to invest in private sectors with no strings attached (obviously, it has to be illegal for the government to borrow against investments like how it’s illegal for them to negotiate with pharmaceutical companies for Part D – which is ridiculous).

Considering giving the government the power of investing trillions of dollars to make a profit brings on chills, looking at the way they’ve handling finances. It’d mean moving closer towards socialism and allowing the government to potentially steer off the highway of social security and onto the exit of debt. Privatizing social security is the alternative, which leaves but one question: how does that effect those coming close to or now retired?

Proposition of Privatization vs. Government

The way things are going today, $200 billion dollars in surplus is collected annually by Social Security, and half of that is accrued interest which is owed in Special Treasury Bonds. If the majority of the surplus is distributed evenly throughout the people of our population within the time frame in which the transition between socialistic and privatization lapses, anybody who’s been paying into the system yearning to reap their well earned retirement check will be supplemented and the already retired can continue coverage under the $600+ billion still kept by the Social Security System.

The Future of the Proposition

As time goes on, the quantity of which the money is distributed will fluctuate along with how much the annual surplus turns out to be. This way, the federal budget will be balanced and any excess surplus will be used to repay the debt towards the Special Treasury Bonds.

This seems to be the most logical approach to handling Social Security by looking at the mistakes at the past, using the resources of the present and planning ahead for a brighter future. Part traditional

Social Security/part privatized retirement accords can be cultivated over several decades and as the last check is written for the last person who contributed to Social Security, the maintenance of the private accounts (which cover survivor/disability insurance, pooled risk insurance) would be in full swing.

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