We are non-commercial, all volunteer and supported by our readers. Please help sustain the Dew by making a donation.
Social Security and the “Lock Box, A Delayed Solution”
When Social Security (SS) was signed into law in 1935, the poverty rate among seniors exceeded 50%. As far as I know, there were no private retirement programs at that time. Unless a senior was wealthy, they either had to work until they died or depend upon family to care for them. I will not go into the discrimination (against women, minorities, and certain types of employment) that was later legislated out of the original bill but, in general, for the first time this country took a stand that protected many, but not all, of the elderly from abject poverty. Today, it is estimated that all that stands between poverty and 40% of the elderly is Social Security.
As first established, the payroll tax to fund the system flowed into the general revenue fund for the federal government. However, in 1939, Congress created the Social Security Trust Fund to manage surplus funds and this Trust had the power to invest the surplus in marketable and non-marketable securities. In other words, like a private retirement account, the growth of surplus funds was intended to handle future retirements. In 2007, according to one source, there was a cumulative surplus of $2.2 trillion dollars in taxes and interest after benefits were paid.
Unfortunately, the Trust loans any excess money to the federal government in the form of bonds, giving Congress a ready source of funds. Of course these bonds have to be repaid, with interest, by more taxes later. The system is in trouble because the government borrowed the surplus, spent it, and now does not have the resources to repay the Trust. The way it looks, Bush was correct in referring to these bonds as “just IOUs that I saw firsthand.”
In 2000, during the Presidential campaign, Al Gore talked about placing Social Security funds into a “lock box.” Everybody laughed at him and thought the idea of a “lock box” was silly. Essentially, what Gore proposed was to stop lending surplus funds to the government. He wanted SS and Medicare placed off-limits to politicians. If this had happened, and that is a very big IF, projections were that SS would be self-sustaining, essentially forever.
The current debate would lead one to think that SS is a flawed system. Not so. It is the huge debt owed the Trust by the government that is the problem. The flaw is that both parties raped the system by “borrowing” the surplus with no plan to repay it and now we have to deal with the consequences.
Unless the current commission working on the problem demands that any and all surplus funds be placed off limits to politicians, there will be no effective solution. Keep the surplus money in a “lock box” where it belongs. And demand that the government make yearly contributions until the bonds have been repaid. There is no need to increase the retirement age or raise payroll taxes or reduce benefits. Stop lending the excess to fund other programs.
Worthy of Comment
Also on the Dew
It is the morning of October 3rd. As I have for the past more than forty October 3rds, I take from the cupboard a special kind of candle and light it. As I do so, I think about my father. It was in the early morning hours of October 3, 1967, in a hospital in Minneapolis, that my father died. It was a great loss. He was not yet 49, I was 21, and his death came way too soon for me to be done needing him. The candle burning on my countertop is called a yahrzeit candle. (yahrzeit literally means “year-time.”) Bur Read on →
Summary: Why does that the line from Yeats apply to America in our times? "The best lack all conviction, while the worst / Are filled with a passionate intensity." One important reason is that the battle playing out in our politics is fundamentally a moral and spiritual battle, and while the right is connected to their moral and spiritual passions (even though that connection has been made on the basis of lies) Liberal America is not. Much of that disconnection in Liberal America is due misguided beliefs, including: 1) that "value" is not really real, and 2) that there is nothing in Read on →
Some are born lucky. Others are born rich or marry into money. Still others create endless streams of opportunity. And perhaps when we can’t answer yes to the aforementioned, we can easily feel entitled. But in other ways, the playing field remains level. Certain attributes of the human condition we have control over, starting with the meaning we assign to the events of our life. And yes, positive events lead us to assign more pleasant meanings. There is enormous manipulation, pursued in the name of profit, to get us thinking about our bodies with a “cattle mentality.” Once we buy into what we “s Read on →
Summary: We all know how to respond to evil. Again and again, our popular stories and mythology take us vicariously and gratifyingly through the process -- e.g. in films like "Avatar," "Star Wars," "Lord of the Rings," where our heroes put themselves on the line to defeat an evil force in defense of sacred values. Why is it, then, that as we face that same essential situation in America's contemporary reality, we fail to respond as our heroes do? *******The the destructive force that has arisen on the right is only one side of America's present national crisis. The other Read on →