A Bit More on the Civil War You Don't See Coming

Yesterday's post gathered a really excellent comment from an anonymous commenter.  As I've done once or twice before, I repeat it here, with some editing.  I hope I don't change the meaning!

The problem with SS in a nutshell is congress. They have made it like welfare and have changed the rules over time to give away more then ever comes in. The fix is really rather simple. First understand that in the early years going back to at least the 50’s the federal government took money from the SS trust fund and today that amount including compounded interest exceeds $4 trillion.

So the fix: First remove anyone from collecting SS who didn’t pay into the system. Sure there are old folks and kids and disabled who really need the money but cut them off if they were not the actual people who paid into SS. Second set the individual monthly payout to be proportional to what the retiree paid in over their lifetime. That is someone who paid $100,000 into SS will get half as much a month as someone who paid in $200,000. Third make the actual payout consistent with general accounting procedures for a annuity. That may mean a particular retiree only gets $100 a month ( or $500 or $750, etc) and not the more generous $1500 or so that SS now pays on average. And the last step is the most important and that is to adjust the total payout each year so that it does not exceed the total paid into the SS system. That means this year you might get $900 a month but next year it drops to $850 (or could go up too) and every retirees SS benefit adjusts accordingly. This way it is impossible for the SS system to go broke. It only pays out to those who paid in and met all requirements and it always pays out no more then it takes in.

The bottom line is a contract was made and the retirees fulfilled their part of the contract. While we may believe it would be easy enough to simply pass laws and end SS the courts will bat last and there is plenty of precedent for deciding that the federal government would have to use it’s power of taxation to meet this contract. So we either fix the system or we face endless litigation and risk an even greater liability in the future.

One last point; SS is one of two programs (Medicare is the other) where the beneficiaries have paid for the benefit. If SS must be cut or as some say eliminated it can only be done morally after all giveaway programs like welfare (all federal welfare programs), federal subsidies, loans, grants, foreign aid etc. are eliminated. It would be immoral for the federal government to make a contract with me to have me forcibly pay in 6% of my income for 50 years promising to pay me a small retirement after age 65 and then renege on that promise while continuing to spend tax money on programs were the beneficiary contributed nothing directly to the funding. So if things are so bad that SS must be ended it can only be done after all other federal giveaway programs are ended as well. By my estimate $1.2 trillion federal dollars are spent yearly on the 2400 federal welfare programs. Most of the rest of the budget is spent on the various “giveaway’s”, (student loans/grants, farm loans and subsidies, energy subsidies, foreign aide, etc.). All of these programs exceed $1.2 trillion as well. Frankly I would welcome cutting the federal budget by $2.4 trillion plus another $824 billion for SS. But somehow I suspect the intent is to try to cut SS but not cut any of the other federal programs. And that brings me back to the morality and legality of such an action. Can the federal government end the SS contract without the umbrella of going through an actual bankruptcy? And can the federal government morally justify taking all the retirees money all those years and give them nothing in return but continue to pay welfare recipients and other hangers on? I think not. I think they will have a legal and a political fight on their hands. I think it would actually be easier to end welfare and the many other wasteful subsidy programs then it will be to end SS.

The problem with everything in this country in a nutshell is congress. 

More seriously, I don't know of any real efforts to get rid of social security.  For all intents and purposes, it really is the third rail of politics and the constituency for it is so big and so vocal, it's unlikely it will ever be ended, before the country collapses (figure 2020 plus or minus 10 years?)   When I say "it won't be there for me", I don't mean it's totally gone, necessarily, just that it's functionally gone.  The "more generous $1500 or so that SS now pays on average" can be made entirely worthless simply by continuing the inflation we're undergoing.  Shadowstats says the current inflation rate would have been reported as around 9% before they started changing the methods in the 1980s.

 

But think of it this way: inflation is at least the amount of money created out of thin air.  QE4 creates  $85 Billion/month, or $1.02 Trillion/year.  The GDP is 15.8 Trillion, so 1.02/15.8 is about 6.5% inflation.  You can see on that graph, the official inflation rate is about 2%.  At one point, Bernanke actually said they could directly deposit money in everyone's personal accounts: that would be the equivalent of devaluing the dollar without being all formal and adding zeroes to the currency.  Recipients would still get that  $1500/month, but it would buy about what $150 or $15 a month buys today, depending on how much they deposit in every account. 

Those of us close to retirement were forced (under penalty of prison) to contribute to SS for our entire working lives, like 40 to 45 or 50 years.  The fed.gov promised to have that money grow and be available for us.  Remember, it wasn't originally supposed to be our retirement, it was "supplemental income insurance" for widows and other elderly people.  As near as I can tell, they ran it that way for a few years until they thought no one was watching.  Then what they did was the equivalent of hiring a bunch of hookers, getting naked, and snorting coke off their bellies!  Oh, and they changed the laws controlling SS so they didn't look quite so corrupt to the casual observer. 

I think your plan has merit. The extension of SS benefits to people who never paid into it, such as illegal immigrants, is part of our problems with the system, and simply limiting it to people who paid in would help immensely.  One of the problems with the system you don't mention is that if you paid into the system for 45 years and die before you get a penny, it could all be gone.  It's ironic to talk about the fed.gov hydra and morality in the same piece, but they try to sound that way - when they're not instigating class warfare.  I have no problems with reducing federal giveaways at the same time. 

Meanwhile, guys like the commenter Anon0814 quotes (and maybe Anon0814 himself - hard to tell from just the couple of sentences) are blaming us for them getting stoned and stealing our money. 

"You either destroyed the greatest country on earth, or stood back and let it happen, in one generation."

" Now the younger generations have to fight a civil war or resign ourselves to live in a 3rd world cesspool."

Seriously, what more were we supposed to do besides vote against the obviously evil ones and have our candidate get beaten most of the time?  Were we supposed to start shooting?  When? 1965, when the first boomers were 20?  When Nixon declared the gold standard dead in 1973?  Exactly what were we supposed to do?  And exactly when?  Some of us are still trying like crazy to get them to not crash the country and you see just how much good we're doing.  We're also trying like crazy to not be a burden on anyone, but now because of the stupid progressives, we can't even buy a product like health insurance.