My economics class is reading “Running on Empty” by Peter Peterson. It is about the looming Social Security disaster in the US.
I, like most of you, think that the government should not be involved in social welfare whatsoever. BUT, what my class is discussing now is how to fix social security. I would love to hear your thoughts on the matter
Again, what I am asking is how to FIX social security, not whether or not the government should be involved in the first place
Many thanks
It’s a Ponzi scheme, or redistribution plan. People can only receive SS payments as long as others are paying into it. Thus, with an increasing number of retirees and fewer working people, the only way to fix it is to reduce benefits and/or increase the SS tax.
There are other solutions for shutting down or phasing out SS, for example, Harry Brown’s solution of having government sell off federal assets to buy private annuities for people, but that doesn’t seem to be what you’re asking for.
It CANNOT be fixed. Impossible. It cannot be done. Of course, it shouldn’t be done even if it COULD be fixed.
My solution.
Buy out the current receipients via annuities purchased with what is left in the trust fund.
Partially buy out those approaching age 65 with smaller annuities.
Everybody else would be pretty much f***ed out of their lifetime contributions. I would simply shut down further payroll contributions.
U.S. Government debt liabilities against the SS fund would simply be written off.
Once that was done, I would order all Social Security records burned and all Social Security numbers invalidated.
You want suggestions to “FIX” SSA, but it can not be fixed (depending on your definition of “fix”). That fact has little, if anything, to do with value judgements surrounding the morality of social welfare.
It is a Ponzi scheme- plain and simple. As the worker to beneficiary ratio decreases the true nature of the fraud reveals itself and the scheme unwinds. If Ponzi called you up and said, “The whole thing is collapsing! How can I fix it?” What would you tell him besides, “That is the inevitable result of your eponymous scheme, Charlie. Get a grip, you knew this would happen.”
That being said, there are several very easy ways to “fix” it.
1)Dramatically raise the Social Security Tax (SS is a tax not a “trust fund”, by the way)
2)Dramatically cut benefits.
3)Dramatically increase the worker to beneficiary ratio without diluting the earning capacity of the workers.
4)Sell treasury bonds to the Federal Reserve to raise money to pay for the benefits (ie use the backdoor inflation tax)
No one will ever get a better deal than Ida May Fuller and the people who paid her benefits, because that is how Ponzi schemes work.
It can’t be fixed because it’s inherrently broken.
But, if you want to know how to make it last a bit longer, one way would be to turn it into a direct transfer program, which it really is anyway, and cut out all this trust fund BS. The money is taken in and spent in the current period, the ‘trust fund’ is full of government IOUs. End that nonsense and you might get some slightly more honest accounting and that might let it go a bit longer before imploding.
Thanks to everyone for there responses. I agree that SS is inherently broken and therefore cannot be fixed. I should have been more clear in my original post.
Here it goes again: What is the best way to “get out” of the social security disaster without completely screwing over the people that we’ve taught to be dependent on the state (if possible)
Thanks to those of you who have already offered solutions and I hope to hear from more of you
I would refer to my earlier answer to your question of “getting out”.
Simply put, taking down Social Security is going to be painful and chaotic. The longer we wait to do it, the more painful it will be. Of course, if we do nothing at all it will catastrophically implode.
Annuitize the current recipients and lower annuities for those approaching retirement. There is not enough money to repay current workers for their contributions so they will get screwed, but they are younger and better placed to overcome the screwing.
It will be painful, no matter how you do it. Amazing isn’t it. FDR has been dead for 62 years and he is STILL screwing us.
You have the answer. Minute details are akin to rearranging deck chairs on the Titanic.There can be no “AHA” moment because wealth can not be created out of thin air. SS steals from some and gives to others by definition. So, steal more or give less.
Any “solution” must fall into one of the four categories listed.
1)Dramatically raise the Social Security Tax (Steal more)
2)Dramatically cut benefits.(Steal less)
3)Dramatically increase the worker to beneficiary ratio without diluting the earning capacity of the workers.(Steal more in the aggregate)
4)Sell treasury bonds to the Federal Reserve to raise money to pay for the benefits (ie use the backdoor inflation tax)(Steal from everyone)
“Here it goes again: What is the best way to “get out” of the social security disaster without completely screwing over the people that we’ve taught to be dependent on the state (if possible)”
You don’t have to screw them over at all. Just make a law that says. 1)No new social security recipients as of [choose a date]. 2)Workers shall pay as much of their wages as required to provide beneficiaries with the same purchasing power of benefits as of [choose another date].
There you have it the dependents are not screwed at all. They will have the same purchasing power as they always have had. There will be no beneficiaries after the death of last person to become a recipient on the date you chose. SS is over and the dependents have been saved.
Of course, the workers may have to eat cat food and live in squalor to pay for this. There will likely be a massive upheaval when you tell them that their sacrifices while paying their “fair share” will be repaid by the knowlege that they “saved SS and the dependents”.
Just because your professor wants the class to engage in magical thinking, is this required? Why not refute the idea that it can be fixed without engaging in moral arguments?
Here are a couple solutions that the pro-regulation types have come up with, and are in the process of being carried out even as we speak:
Print and inflate money at 15% real inflation rate, while report official CPI at 3% . . . the result is reducing SS obligation to recipients (and to TIPS bond holders) at 12% per year.
Socialize medicine, eventually putting in price caps for all medicine and medical procedures, so medical research will slow down and hospital service will dilapidate. The next time there is an epidemic, whole swath of the old population will be wiped out . . . further reducing SS obligations
Until people realize that “free service” = bad service, these two solutions seem to be the most likely to get votes from the SS recipients themselves.
You can’t. Someone is going to get screwed no matter what.
I realize this. How do you minimize the “screwed-ness”?
You do what you do in any bankruptcy; liquidate the assets and split up the money amongst the creditors.