The Thrift Savings
Plan...it's good enough for Congress,
Congressand the GOPis moving too slowly on Social Security. Because Social Security has been a "hands-off" entitlement for so long, Congress is afraid to fix itother than perhaps to raise the current Social Security tax by another percentage or two in order to make it another generation's problem. We have reached the point now where Band-Aid solutions will no longer work. Congress is actually going to have to do something this time.
But what Congress appears reluctant to do is to embrace the President's Social Security recovery plan largely because most members of Congress are afraid to admit that Social Security really is in trouble. Congress is clumsily grappling with a problem they have chosen to pretend does not exist since it will cost them votes regardless how they vote on privatization. A handful who have actually admitted, on the record, that there will be a problem "down the road," have offered Band-Aid solutions that will postpone meaningful Social Security reform until they're either dead or retired from office.
Without offering any definitive reasons why they feel as they do, or offering any alternative plans of their own to save Social Security, several Senators and Congressmenand not just the tax-and-spend liberalsclaim Bush's vision for private savings accounts not only won't work, but isn't necessary.
Why not? Bush's plan, first of all, is not Bush's idea. It's theirs. Bush's plan is actually an expansion of the Thrift Savings Account that covers members of Congress and their staffers. It's strange that, when they talk about privatizing a portion of Social Security for younger workers, few Congressmen and Senators equate privatization with the government's Thrift Savings Account which is precisely what it is. Why? Because while they won't admit Social Security is bankrupt to you, privately they are afraid if Bush diverts any of that money into private accounts, the system will collapse before the doomsday date of 2040on their watch, when you will hold them responsible for the system's shortfalls.
When the American people first discovered that members of Congress and their staffers had a different retirement program than the rest of us, you could hear the screams of protest all the way to the hills of eastern West Virginia that serve as the gateway to the Shenandoah Valley. Now, when future generations of civilian retirees are on the cusp of being included in a very similar program, the young lions of the Land of Eden are not only strangely silent, they are almost indifferent to the Social Security debate. They are silent because they're convinced Social Security is not broken. What makes them think that? The AARP told them. The AARP, which claims to be the spokesman for graying America, should be hammering Congress to adopt the Thrift Savings Account for the future generations of seniors. The AARP isn't speaking out in favor of privatization simply because they don't represent the future generation of seniorsthey only represent this generation of seniors. And, quite frankly, if their lobbying efforts fixed the problem through privatization, tomorrow's seniors won't need them and the AARP's membership would plummet.
Let's face it. Strip off the "we represent senior America" rhetoric and the AARP isn't any different than any other oversized, more-muscles-than-brains, obsolete labor union. Wake up, senior America! It's not about you. It's about the money. You just happen to be the commodity the AARP uses to generate that money. And as shocking as it may seem, most of that money the AARP uses to sell their agenda doesn't come from graying America, it comes from the liberal U.S. bureaucracy in Washington, DC. Over the years, Uncle Sam has paid the AARP over a billion dollars. In exchange for government's 30 pieces of silver, the AARP has championed the government's position as their own. Today, the liberals on both sides of the aisle in both Houses of Congress claims Social Security is solvent, and only needs a tune-up to get us through another 68 years. Not in the least surprising, that has also become the position of the AARP.
The current AARP ad (if you haven't seen it) is a real Madison Avenue masterpiece. "IF YOU HAVE A PROBLEM WITH THE SINK, YOU DON'T TEAR DOWN THE ENTIRE HOUSE." Thought provokingand frightening. Of course, it's supposed to be. Fear is the strongest catalyst to win hearts and mindseven when the message is deceitfully wrong. The text of the ad says: "Let's not turn Social Security into Social Insecurity. Yes, the program is in need of reform, which can be done with a few moderate changes, but it is not in need of radical overhaul. Creating private accounts that take money out of Social Security is an extreme measure that will hurt all generations and could add up to two trillion in more debt. Let's not stick our kids with the bill."
Excuse me? What in the world does the AARP think Congress has done over the last seven decades? By stealing the deposits to the Social Security Trust Fund as soon as they came into the Treasury, they prevented those deposits from being invested where they would grow the interest earnings that would be needed to meet the Social Security payments (thereby saving the principle to grow more interest income to support more retirees), Congress saddled our children and grandchildren with the debt by forcing themand us todayto meet the "payroll" of the current and future Social Security recipients with the dollars in our pocketsnot with the billions of tax dollars the government was supposed to have invested in order to accumulate the trillions of dollars needed to keep the fund solvent since its birth in 1935.
The AARP is now so institutionalized that it has become a defacto part of the bureaucracy it was originally created to lobby on behalf of the senior citizens who funded it. While it still claims to represent Gray America, AARP's core constituent has changed. The AARP is now an official NGOa nongovernment organization with UN standing. Like most labor unions today, the AARP has simply gotten too big and too "institutionalized" for its own goodand for your good. Today it represents the views of the socialist big money establishment behind the bureaucracy. The AARP no longer offers solution for the little guy, it offers compromises that generally benefit the establishment more than the people it claims to represent. The AARP has now become part of the problem, as their current ad defending the status quo of Social Security proferred on behalf of the Democrats in the House and Senateaffirms. If you are a member of Gray America, you need to dump your membership in the AARP and put your financial support behind seniors' groups like 60-Plus Association and United Seniors Association where your interests, not those of the Democratic bureaucracy, are paramount. Enough saidwell, almost. Senior Americans who financially support AARP should understand just how the advocacy of the AARP has been shaped over the past two decades. Since you can't serve two masters, you can count on any advocacy group inside-the-beltway to serve the one that pays the best. And, as I already pointed out, as America's seniors were sending AARP their nickels and dimes, the senior's group received over one billion taxpayer dollars from the federal government. Now let me ask you, just whose advocacy interests do you think the AARP is really protecting? Yours? Or their liberal backers in Congress?
As the mainstream liberal media watched the do-nothing pantomime of Congressmen and Senators pretending to be engaged in the Social Security debate when, in fact, they are doing nothing, the media took the opportunity to hammer home their view that there was nothing wrong with Social Security that a few more of your tax dollarsand minewouldn't fix. And even though Bush had sent out several Administration spokespeople, including several Congressmen, to explain his program, the president's men are losing ground because the liberal opposition still controls the mind of the media and the talking heads that appear on their weekend political programs and the headlines that appear in the local newspaper on Monday morning.
When Sen. Rick Santorum [R-PA] spoke at Drexel University in Philadelphia last week, he began his talk by parsing the question: "What happens in 2008?" (The answer, of course, is that's when the baby boomers from World War II start to go on Social Security.) Instead, the student audience shouted: "That's when George Bush leaves office." That pretty much set the tone for Santorum's privatization pitchalthough the students at Drexel seemed evenly divided on the question of private accounts. Congressman Walter Jones was planning to hold similar talks in North Carolina until all of his private polls showed the majority of those who would likely have attended were opposed to the president's plan. While twenty-nine House Republicans are firmly fence-sitting on this one until the Bush people sell the merits of the privatization, over half of the GOP has taken a "wait-and-see" attitude since Social Security is the Queen Mother of all entitlements.
Treasury Secretary John W. Snow is urging the president to get his people out there to sell the plan since Snow, like Fed Chairman Alan Greenspan and the leadership of both sides of the aisle, know that one of two things will happen to Social Security if its not fixed. Either Social Security will bankrupt the taxpayers when their Social Security taxes exceed their income tax "contributions;" or Social Security will bankrupt the Treasury. Rhetoric aside, Social Security is broken beyond repair because six generations of Democrats in control of the purse strings of America stole the money that was supposed to be placed in an interest-bearing trust fund. Instead, the money was used to finance the welfare system of the Great Society. Lyndon Johnson used welfare to create a dependent class in America that would be obligated to keep the Democrats in control of Congress in order to keep those work-free paychecks coming. Like your typical beltway bureaucrats today, the institutionalized Democrats of the Great Society simply couldn't tell the difference between interest-bearing funds on deposit in the Treasury and IOUs in the Treasurer's desk drawer.
Senate Minority Leader Harry Reid [D-NV] who pledged that no Democrats would support Bush's plan, told the Washington Post that "...it's clear that the Republican privatization plan actually makes matters worse. It's no wonder that that so many Republicans are running away from it as fast as they can." The political pragmatists on both sides of the aisle have obscured the problem and its reality for so long that it's not surprising to see the amount of confusion it generates today. However, it doesn't take Albert Einstein to see the problem.
In 1940, the total Social Security contribution made jointly by the worker and his employer was 3% of the first $3,000 of income. Today it is 12.4% of $87,900 in income. Next year your income will be taxed for Social Security to $90,000. In 1940, 50 workers supported each Social Security recipient. In 1985, 10 workers supported each retiree. Today, 3 workers support each retiree. Do the math. By the end of the next decade, two workers will support each social security recipient. By 2040, with no major changes in the system, Social Security will be bankrupt since it will require each worker in America to personally fund the retirement income of one retiree. In other words, roughly half of your gross income will be seized in FICA taxesnot counting the funds that will have to be generated to cover the payroll for the thousands of bureaucratic minions who are employed by the US Department of Social Security. Federal income taxes and FICA taxes (excluding all other taxes) will consume about 75% of your paycheck. (Now you understand one more reason why President Bush feels it is necessary to grant economic amnesty to over 15 million illegal aliens who are currently being paid by their American employers under the tablein cash, with no taxes being deducted to help offset this burden on taxpaying Americans.) The legalization of these workers will provide enough breathing room for Bush's privatization program to work. (It should be noted that had the FDR New Deal Congress actually obeyed their own law and placed the Social Security receipts in an interest-bearing trust accountand had ensuing Democratically-controlled Congresses kept their hands off the moneynot only would Social Security not be in trouble, it would be the most solvent segment of the federal bureaucracy. But, Congress has never seen a dollar it didn't want or a penny it couldn't spend.
Now, let's ask that question again. Do you think Social Security is broken? You bet it is. Can it be fixed? Yes. How? Not by raising taxes. Americans are already tax-poor, even though the liberals who keep flapping their yaps about equality believe if we have a dollar left in our pocket on payday, we still have too much discretionary income; and what we haven't spent should be given to the guy whose paycheck runs out before the week. Social Security can only be fixed if we remove from the greedy grasp of Congress the funds used to finance the retirement gratuity government graciously grants the citizens it has robbed of their sweat equity throughout their lifetime. As long as Congress can appropriate that money, it cannot be invested and will not grow.
While creating privatized individual Thrift Savings Accounts like those utilized by Congress to supplement the government's retirement gratuity is a necessary first step in protecting Social Security beyond 2030, it is equally important to enact what might be called the Social Security Investment Protection Act of 2005 which would require [a] that all Social Security revenue be deposited in interest-bearing accounts and not the general treasury, [b] that Social Security deposits cannot be spent for anything other than for what it was designated foras payment to Social Security recipients, and [c] that all government spending programs (except Defense and Homeland Security) be capped at their 2004 level, and that 30% of all those budgeted dollars be surrendered to the Social Security Trust Fund until such time as all moneys stolen from the Social Security Trust Fund by overzealous politiciansplus accrued, compounded interestis returned to the Trust Fund.
Of course, you and I know that's just so much wishful Cinderella thinking. So we need to look at the plans that have been suggested. (As an author's note, I have stressed that the Democrats insist privatization most emphatically won't work. It won't work, in their mind, because they know if they allow people to control their own money, those people won't need them. And, logic suggests, if people don't need them, they won't reelect them. And, that is why they believe it won't work. Once again, enough said.)
The first plan, advanced by two Democratic economistsPeter Diamond and Peter Orszag(and not in the least surprising) does not include privatization. It includes two of the Democrats favorite devisestax increases and benefits decreases. Pay more for less. That now seems to be a way of life in America. Have you been to the supermarket lately?
Diamond and Orszag believes the taxpayers of America still have money to pay. Not only would they raise the current $87,900 cap to $105,000, they favor an additional 3% surcharge on those whose incomes exceed that amount. Then, on top of the tax increases they would cut benefits on those 45 years of age today by slightly less than 1%; those who are 35 today by 4.5%, and those who are 25 by 8.5%. And, to make sure nobody collected more than their fair share, retirement age would be advanced as life expectancy increased. Today, full benefits retirement age is 70. By the time I reach that age, I expect the date will be advanced to 75. Who knowsI may never live enough to enjoy the frustrations of retirement if they keep advancing the mandatory retirement age by five years every five years or so.
Robert Ball, a former Social Security Commissioner, would raise the cap to 90% on wages subject to payroll taxes$145,000. Instead of outwardly cutting benefits, he would simply eliminate any cost-of-living increases. By increasing taxes as needed he would cover any shortfalls. Like Diamond and Orszag who would include all State and federal workers in their plan, Ball would do the same. In addition, Ball would add a provision into law that would designate all inheritance taxes on estates worth $3.5 million or more to the Social Security fund.
Fed governor Edward M. Gramlich, like Ball, Diamond and Orszag, would raise taxes to cover the Social Security shortfalls. But, younger workers would contribute 1.6% of their wages to a mandatory private account. He would also raise the retirement age and cut benefits. Like Diamond and Orszag, retirement age would be periodically adjusted in direct relation to longevity. Gene Sperling, one of Bill Clinton's most loyal and trusted financial advisers backs Gramlich's plan.
Peter J. Ferrarabecause he wrote the first book on partially privatizing Social Securityis now becoming known by many as the father of the privatized movement. Ferrara advanced the theory long before anyone on Capitol Hill even grudgingly admitted there might be some fiscal problems in Retirement Fantasyland. But unlike other advocates of privatization in which those plans would allow the young wage-earner to invest anywhere from 1.6% to 4% of their gross income in a retirement account, Ferrara would allow the worker to invest up to 6.4% (the current amount paid by wage-earners to Social Security). Furthermore, under his program, benefits would not be cut since the benefits were promised and Ferrara uniquely believes government should keep it promises. Yeah, this guy's a Libertarian. His book was published by the Cato Institute. Like the Bush proposal, Ferrara's plan would offset contributions to the private accounts with parallel cuts to the worker's basic Social Security benefits. Since Ferrara's plan virtually allows the recipient to escape Social Security, the benefits generated by those participating under such a plan would be monumental compared to those generated by Social Security. Clearly, Ferrara's plan will never be adopted since the liberals are afraid of the imminent collapse of Social Security if even the minimal amount proposed by Fed governor Gramlich was diverted. (By the way, those who are so fearful of the impending collapse of Social Security that they will do just about anything to prevent even 1.6% of the Social Security revenue from escaping their clutches are the same politicians you are watching on the Sunday political talk shows assuring the American people that Social Security is solvent and there is no reason to privatize the system.)
But, once again let me say this. As much as I am against the notion of rewarding illegal immigrants by granting them work visas that legalize their status in the United States, doing so will move the incomes they receive from under the table and into the light of day. Fifteen million new legal taxpaying workers will be placed on the tax rolls immediately. Fifteen million new taxpayers will eliminate the need for this discussion for more years than I probably have left. Think about it. For every 265 thousand illegal workers who are legalized to work in this country, Bush will shave $3,700,000,000.00 off the $3.7 trillion Social Security shortfall. Those 15 million illegal workers would virtually wipe out the shortfall and make Social Security safe for another 68 years.
Well, for whatever their merit, once again you have my two cents worth.