there will no more i.o.u.'s left in the trust fund, so everyone's benefits would have to be cut by 27 percent
One of the oddities in this national debate to me has been that no one has mentioned that there is a cut in benefits something on the order of 27 percent either way. Either we keep going the way we're going and the shortfall forces a reduced benefit on that order or we switch to price indexing and plan a reduced benefit on that order. Technically, the former is insolvency and the latter not, but both hit the wallet more or less the same.
The real question is if we should have a social security system at all?
If not, then we should have some kind of exit strategy.
If we are to have a social security system then everybody has to participate and we have to make the social security system solvent.
The IOU business is really bogus. These IOUs are like treasury bills or bonds. The government has borrowed the money and has to pay it back. If the government does not have enough money to pay back all the borrowed money, the IOU to SS has to come before they pay back the money borrowed from the central banks of China or Japan.
So instead of investing the money that was paid into social security in some private investment account, we decided to invest that money in America. If that money didn't come from the social security trust, we would have to have borrowed from somewhere else. China and Japan would have owned a bigger piece of America.
All these projections to 2050 is also all bogus. 2050 is a long time out. The projections are all based on flimsy assumptions. The same kind of flimsy projections that dotcomers used to fund those dotcom businesses during the dotcom bubble. Only this is in reverse. Instead of trying to sell the most optimistic case, tehse assumptions are used to sell the pessimistic case. Either way, it is bogus.
Those projections are worthless. However, the underlying soundness of the social security system is not as bad as some Republicans would like to scare us into thinking.
If the economy were to grow as during the Clinton administration, you wouldn't even need to make any adjustment.
If the economy continues to deteriorate like it has during the Bush administration, all you would need are some minor adjustments eg increase taxes for those making more than $90,000 a year, increase the retirement age, and develop payout using means testing.
Doing away with the concept of the Social Security system is a different topic. Why have private accounts at all. Why not just ask people to take hold of their own money and invest it any way they want. There is merit to that argument.
But that is not the argument that is being made.
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