- Important: All passwords were reset on 06/15/11. Old passwords will no longer work. Click here to retrieve your password.
- Subscribe to Our Free Dewsletter
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
I recently had the pleasure of roaming about the grounds of the Carter Center in Atlanta. It was an early Sunday morning before any of the buildings were open and I had the place pretty much to myself except for one lady who volunteers there and was fidgeting around in one of the small side gardens. I didn’t tromp over the entire thirty-five acres, but I covered enough to be impressed with the design and the number of large Oaks that provided much needed shade from the bright sunshine and heat. The visit took me back in time to when I w Read on →
July 24, Thursday afternoon, 3:30. The July sun bears down with no mercy. The humidity’s high and the terrain rough and remote. To the northwest a cloudbank promises relief but relief never comes. We drive on in no need of windshield wipers. Robert Clark and I are miles from city life headed deep into the Francis Marion National Forest. To reach our destination, we turn off US Highway 17 onto State Highway 45. We drive for miles looking for Halfway Creek Road. Our directions, scribbled onto the back of an envelope by a naturalist friend, instruct us to “turn left onto Hal Read on →
Every human culture, it seems, has had some notion of the sacred, and has placed that notion at the center of its worldview. From this, we can conclude several things: 1) that a sense of the sacred – like other universals, such as language and music – is an inherent part of our humanity; 2) that therefore we can conclude that this sense has served the cause of life of our kind through the eons in which we developed; and 3) that the experience of “the sacred” possesses an important kind of power, that it is not just an inherent part of us b Read on →
More than a century ago the “forgotten man” of Mississippi and across the South — the farmer, the common worker — decided he’d had enough of “Wall Street speculators who gambled on his crop futures; the railroad owners who evaded his taxes, bought legislatures, and over-charged him with discriminate rates; the manufacturers, who taxed him with a high tariff; the trusts that fleeced him with high prices; the middleman, who stole his profit.” The forgotten man was so angry, historian C. Vann Woodward goes on to say, that he created a movement. It came as close to toppling our two-party system as any effort Read on →