Lie #1: The Baby Boomers are about to bankrupt Social Security. Actually, way back in 1983, Congress figured out that the Baby Boom generation would have to be dealt with at some point. Like a wise 35-year old planning for her golden years, Congress's solution was to put aside some extra money for the nation's retirement. To do this, Congress raised Social Security taxes by a little bit. The tax hike worked exactly as planned. Each year since 1983, extra money has flowed into the Social Security Trust Fund. That fund now holds over one trillion dollars, and over $170 billion is now being added every year. In 2008, the oldest Baby Boomers begin to retire. In 2016, they will begin drawing down this vast storehouse of money, just as designed. Yet, politicians who know better are waving around this 2016 date as some sort of Social Security doomsday.
When they begin drawing down this "vast store of money", then they will have to be paid from general taxation. If the amount they need to be paid exceedes the amount of taxes that can will be imposed then it all has to be borrowed on top of an already increasing national debt. The system might not be bankrupt as such but it doesn't have any real assets either which leads me to
Lie #2: The Social Security Trust Fund is a sham.
Not a lie. Its true. The IOU's are worthless. Not because the Tresury will default on these bonds but because the money is a loan from the government to the government. The fact that you "owe yourself money" doesn't mean you have an assett. If I write you a check and you agree to pay me back with interest, the loan is an asset for me (and a debit for you). If you write the check to yourself, deposit it in another account and then spend it, the IOU you wrote yourself isn't an assett even if you will eventually pay back your checking account for the original check.
Lie #3: The stock market is definitely a better deal.
No its not definitely (as in 100%) a better deal. More like 90%+. The rate of return for social security is not "about 3 percent". It's zero, or because some money is used to administer it its a slight negative return. SS money is taken from some people and given to others. It isn't invested. The 3% "rate of return" is not a return on investment but rather grabbing some money from new people, with the promise that they can get benefits later, to pay the old ones. The "rate of return" can be good in a ponzi scheme but eventually someone is left holding the bag.
Even if you where going to call this a rate of return there would still be weaknesses in your argument. It relies on one estimate of future stock returns that is much lower then most estimates, and it gives too high of a "rate of return" on social security. -
"Those born in 1960, for example, are currently calculated to receive a real rate of return, on average, of less than 2 percent on their cumulative contributions. - Testimony of Chairman Alan Greenspan before the Committee on the Budget, U.S. Senate, January 28, 1999"
nationalissues.com
That shows a less then two percent rate of return. That rate might be even lower now with higher social security taxes and possible restrictions on benefit growth.
Lie #4: Tax cuts are "raids" on Social Security.
I agree with Eric Spitler on this one.
Tim |
