John Kerry's Social Security Approach Is a Failing Pyramid Scheme
by Michael Ashbury
Friday, October 22, 2004
Established in 1935 by a Democratic administration, Social Security has been held over the heads of an aging population for almost 70 years. In every presidential election the Democratic left resorts to scaring seniors by telling them that if they don't vote Democratic they will see their benefits reduced or eliminated. Every four years we hear about Social Security heading into bankruptcy, yet the left, even when they were in power, failed to offer any constructive changes other than increasing the annual contribution and restricting benefit provisions.
A program, which initially was established at 2 percent of annual salary, has been successively increased to where today at 15.3 percent its tax on the average family is higher than the federal income tax. Further, Congress has continually increased the salary caps against which the tax is applied, and increased the age at which an individual is eligible to start collecting full benefits.
While the senior population believes that the left has been the major supporter and protector of its Social Security benefits, it has been the left--supported by votes by John Kerry--that has continually increased the cost and lowered the benefits. Democrats with the aid of John Kerry:
Voted eight times to increase taxes on Social Security checks with 85 percent of the money, paid into the system by retirees, now subject to federal income tax,
Removed Social Security funds from an independent trust fund and moved it to the General Fund where the left could use it for social programs.
Consistently refused to return these funds to a ''Lock Box'' where they could be protected from annual pork barrel spending,
Eliminated the previous income tax deduction for Social Security withholding,
Initiated Social Security payments to immigrants even though they had not fully paid into the system.
Though Social Security has certainly supported millions of seniors and their spouses, it has basically been a pyramid scheme where participants at the bottom are continually asked to contribute more and more to support those at the top of the pyramid. And the government as the owner of the pyramid game is the ultimate beneficiary if you and your spouse die before you reach retirement age. All beneficiaries receive for the years paying into the system is a burial allowance of $250. If a private organization managers treated their contributors (and this is forced contribution) in this manner they would be locked up and the keys thrown away.
The program which has been discussed by responsible legislators on both sides of the aisle--but not John Kerry--has been to allow younger workers place a portion of their annual contribution in a private account which they, and not the government, own. Typically these funds would grow at a faster rate than those held by the government and they would be a nest egg for their beneficiaries if they die.
Consider that a young college graduate with a $50,000 income is currently paying $7,650 a year into the Social Security System. Even if he never receives a raise over the next 43 years he and his employer would have contributed $328,950 to the government program, and with income increases more than a half-million dollars. At a modest 4 percent interest rate, the total value of this account approaches $1 million. If he should accidentally die, without a surviving spouse, before he reaches retirement age, all of that money reverts to the government. The National Center for Public Analysis calculates that if the payroll taxes of this 22-year-old engineer were invested 60 percent in stocks and 40 percent in bonds with an annual yield of 4.8 percent his monthly payment at retirement would be $7,910, and the principal can be left to heirs. Compare that to the currently projected $2,054 monthly payment under Social Security, and the principal is owned by the government's general fund..
As for current seniors, the trustees of the Social Security Administration project that sufficient funding is available to pay full benefits through the year 2042. The Congressional Budget Office extends this even further to 2052. The Bush administration wants to protect current and soon-to-be retirees, while providing an improved alternative for future retirees. John Kerry's approach is merely to extend the failing pyramid scheme |
