The Urban Grind

In my previous Social Security Hysteria post, I wrote about how I doubted that Jonathan Alter and others who are so opposed to the idea of ordinary people being able to invest their hard-earned money in stocks and bonds, rely soley on our current government backed ponzi scheme to finance *their* retirements.

I must have really struck a sensitive nerve with Jonathan Alter, who left the following response to my previous post:

you bet I have my money in stocks, bonds and 401ks. So what? I'm talking about the safety net--the money for those who have not saved like you and me. They depend on social security. Their personal accounts would probably go up. And if they went down? Would you be willing to bail them out? Probably not. Then we'd have a return to poverty among seniors--which social security all but eliminated. Do you want it back??

Lovely!

I'd just like to understand a few things. If stocks and bonds and 401k's are good enough for Jonathan Alter, then why not for everyone else? The fact that he asks what should be done if people's accounts go down in value is quite telling. I suppose they would do what he would do -- monitor their money and make adjustments accordingly. But judging by the nature and tone of his questions, he seems to believe that ordinary people are not capable of making such judgments, and that he is superior to the masses in that regard.

So I will set him straight. (Many thanks to Barking Moonbat Early Warning System for their excellent Social Security posts.)

Here are some stats from the 2004 Annual Report of the Social Security Trustees (via BMEWS):

Social Security is heading toward bankruptcy. According to the Social Security Trustees, thirteen years from now, in 2018, Social Security will be paying out more than it takes in and every year afterward will bring a new shortfall, bigger than the year before. And, when today's young workers begin to retire in 2042, the system will be exhausted and bankrupt. (Summary of the 2004 Annual Report of the Social Security Trustees, p. 1)

Payroll taxes have been increased more than 20 times since 1935, and we still have not fixed the problem. The Social Security payroll tax, which was once 2%, is now 12.4%. To meet the needs of the 21st century, payroll taxes would have to be raised over and over and over again on American workers, stifling economic growth and job creation. Economists predict that payroll tax would have to rise to more than 18% if our children and grandchildren are to receive their scheduled benefits. (2004 Report of the Social Security Trustees, p. 165).

So I'd like to know why I and other younger workers should be forced to subsidize the retirement of well off seniors, or in Alter's case, people who didn't bother to save for their own retirement.

Now here is where I will probably be called a cold hearted hater of poor people. No doubt there will be those that say to just make the higher-income workers pay Social Security taxes on their entire incomes (rather than on just the first $87,900 they earn). Right! Just soak those EEEVIL rich people, and everything will be all better! Yet here's why the Heritage Foundation says that won't really work:

However, this relatively sub­stantial increase on targeted workers tax burden would only delay Social Security's annual deficits by approximately six years. More money would initially come into Social Security's coffers, but the program would ultimately pay greater benefits to retirees who had higher incomes. Although the government could collect higher taxes from certain citizens without offering higher benefits, such a move would be the first step in transforming Social Security into a welfare program.

Moreover, such a tax increase would seriously harm the nation's economy. While those who support this tax increase may envision it as a tax on the rich, it would also affect millions of mid­dle-income families. Combined with federal and state income taxes, it would raise their overall taxes to 50 percent, or even 60 percent of income, discouraging people from working, sav­ing, and investing. To make matters worse, such an increase in taxation would affect entrepre­neurs and business owners, resulting in job losses as businesses downsized to make up for the greater tax burden.

But getting back to the private accounts, from what I've read, people would have the option to put their money into a range of broad-based investment funds, where they could check on, and adjust their allocations. However, once a person chooses the private retirement account option, they won't be able to go back to the traditional system. What they CAN do is put their money into government bonds, like the ones the current system invests in. In addition, the following safeguards would be put into place:

Personal retirement accounts would be protected from sudden market swings on the eve of retirement. To protect near-retirees from sudden market swings on the eve of retirement, personal retirement accounts would be automatically invested in the 'life cycle portfolio' when a worker reaches age 47, unless the worker and his or her spouse specifically opted out by signing a waiver form stating they are aware of the risks involved. The waiver form would explain in clear, easily understandable terms the benefits of the life cycle portfolio and the risks of opting out. By shifting investment allocations from high growth funds to secure bonds as the individual nears retirement, the life cycle portfolio would provide greater protections from sudden market swings.

What is so horrific about this? I thought liberals were supposed to be PRO-CHOICE! I guess not.