Let's Retire Social SecurityFYI from THELIGHT PARTY
It's a scam that lets the old pick the pockets of the young. There is a better way.
BETHESDA, MD. - Americans focused like a laser beam on the balanced budget amendment debate in the Senate last week. Unfortunately, most missed important testimony before the Senate Finance Committee that holds the key to whether the federal government ever can really balance its budget.
The subject was Social Security. But the witness was not the usual interest group representative for the elderly. He was Deroy Murdock, a young African-American who co-founded a group called Third Millennium, there to tell senators why his generation wants to opt out of the Social Security system.
As Murdock put it: "For 60 years, Social Security has worked hard, and soon it hardly will be working." Murdock suggested Congress initiate "the beginning of a candid dialogue on how to move beyond Social Security to a system of private retirement accounts."
Good luck. Politicians - both Republicans and Democrats - are scared to death of any real debate on Social Security. Beware to any politician who suggests the current system is grossly unfair, especially to the youth who, after all, often don't vote.
According to a survey of Americans 18 to 34 conducted for Third Millennium by Republican pollster Frank Luntz and Democratic consultant Mark Siegel, only 28% of young Americans believe there will even be a Social Security pension system by the time they're old enough to retire. And only a tiny 9% of them believe that the system will be able to provide them an adequate retirement income.
But the problem isn't just in the future. the current system amounts to a massive redistribution of wealth from younger, working-age Americans to the elderly. Social Security is very much a pay-as-you-go retirement system - with a twist. The money to pay current Social Security recipients comes from the paychecks of those currently working, via Federal Insurance Contributions Act taxes.
Social Security is the single largest program in the federal budget. Roughly 20% of all federal spending goes to Social Security benefits. And contrary to the demagoguery on this issue, recipients haven't 'earned' those benefits.
Under the current system, Social Security recipients, on average, collect what they put into the system in about six years. For the rest of their lives, they collect money paid into the system by those still working. And while Social Security has been enormously successful in reducing poverty among the elderly, it has done so by heavily taxing working-age Americans.
The point is not to blame Social Security recipients, but to figure out a way to take care of the elderly poor and let the non-poor take care of themselves better than the government can. We already have means - tested programs to provide for the former group; it's the latter we need to plan for - and soon.
Murdock's group favors private retirement, accounts to replace the current system. Chile privatized its pension system in 1981 and, by all accounts, the new system is working beautifully. Under the Chilean system, 10% of workers' pay is deposited into individual savings accounts the workers control.
If American workers were given the same option, the 15.3% of their pay, including employers' "contribution," that new goes toward Social Security would create a comfortable nest egg for retirement. A 25-year-old worker earning average wages over his lifetime would have $1,550,680 at age 65 if he could invest the equivalent of his total FICA contributions, $4590 a year, assuming a relatively conservative and realistic 9% return on investment per year.
As Tom Miller, director of economic policy studies at the Competitive Enterprise Institute, wrote recently: "Each round of check-dispensing politicians must seek out another generation of young workers to entice or coerce into higher payroll tax payments that will keep the revenue base of the (Social Security) pyramid growing.
Why not take politicians out of the equation and let Americans invest their own money as they choose to provide for security in their old age?
(Reprint, USA TODAY, March 8, 1995 Issue, Article by Linda Chavez)
Copyright © 1996. The Light Party.
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