Private accounts are the solution for Social Security

Last updated on May 13th, 2019 at 02:33 pm

Wisconsin Congresswoman Tammy Baldwin made the following statements about Social Security: "We need to do everything we can to protect and strengthen Social Security and make sure it is around for at least another 67 years, rather than diverting Social Security contributions for other purposes."
"I am also here to warn you that the future of Social Security, a guaranteed benefit for America’s seniors, has never been as threatened as it is today under the pretext of privatization"
Joseph Goebbels, the Nazi propaganda minister, once said, "The essence of propaganda consists in winning people over to an idea so sincerely, so vitally, that in the end they succumb to it utterly and can never again escape from it."
So it is with the Social Security debate. Opponents of plans to restructure the system to include an element of privatization will do or say anything to keep the masses tethered.
There are at least three lies in the two Baldwin quotes.
Lie #1 – Diverting Social Security contributions. Diverting? How about $1.7 trillion? That is the amount that has been diverted so far to fund general government expenses. Both Democrats and Republicans have been complicit in this shell game, in which the federal government takes the surplus cash from the mystical "trust fund" and replaces it with an IOU. The congresswoman should have said, "So far, the federal government has diverted $1.7 trillion of your employment taxes to fund general government expenditures and make the deficit look smaller."
Lie # 2 – Diverting Social Security contributions. Wow, two lies in one sentence. If you think these are "contributions" try not making yours and see what happens. The congresswoman must know the difference between a contribution and a tax. Why not call it what it is? It is an employment tax.
Lie # 3 – Guaranteed benefit for America’s seniors. Guaranteed? By whom? This is another lie repeated over and over. The Supreme Court has ruled that workers have no right to receive Social Security benefits, there is no guarantee. Congress may reduce or eliminate the "guaranteed" benefits at any time.
This debate should be on the facts.
The current system is not sustainable. In 1930 there were 41 employees for every one retiree. Today, the ratio is 3.4:1. In 2030 it will be 2.1:1.
• We have 47 million retirees today. In 20 years we will have 77 million.
• In 2016 cash outflow will exceed cash inflow.
• The current cash surplus (cash in from payroll taxes exceeds cash out for benefits) is spent in other areas of the government.
• There is no guarantee.
• There is no trust fund with your name on it.
• The longer we wait to fix this problem, the more painful the solution.

Most Americans would prefer controlling their own future. Most Americans do not want to be tethered to the government. Most Americans would prefer owning their retirement savings rather than receiving a quarterly statement indicating what their future benefits might be if no one in Washington changes the rules. Most Americans would opt to be able to pass their retirement savings on to their spouse, children, or grandchildren. Most American respect and understand the benefits of private property.
The current system is actuarially bankrupt. It will bankrupt our country if it is not changed. For every two-year election cycle that we wait to address the problem, the costs to fix it increase by about $320 billion.
The solution: privatization. Many countries have already converted to private retirement accounts. Chile, Great Britain, Poland and Hungry to name a few. Even communist China allows workers in urban areas to invest 50 percent of their payroll taxes in individual, privately invested, accounts.
Drop the misleading rhetoric and deal with the problem.

Michael Fredrich is president of Manitowoc Custom Molding.

June 24, 2005, Small Business Times, Milwaukee, WI

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