How to fix social security
February 28th, 2008 at 04:29pm Don R. Gugliuzza
All the national politicians are talking that we have to fix social security. Unfortunately, they’re all thinking in terms of increasing the tax and reducing benefits. They don’t want to admit to thier complicity in creating the problem as it exists.
Here’s how to fix it.
First, Congress has to stop taking $1,000,000,000 per year out of the “excess” in the trust fund. The “excess” is the difference between the taxes paid in and the payout of benefits. The one billion dollars that is available for them to put into the general fund means that we are still paying in more than what is needed for the benefits. Interesting isn’t it? We hear how there isn’t enough money for the benefits, but we still have an excess in the fund.
Secondly, repeal the Medicade/Medicare bill that was written by the prescription drug industry. You know the one I mean. The one that prohibits us from buying cheaper prescription drugs from Canada that are manufactured here and exported to Canada. Those Canadians must be a lot stronger than we are because they can use the drugs that might not be safe for us. Also, there is a provision in the legislation that prohibits Medicare/Medicaid from negotiating prescription drug prices. It’s nice the way the industry was able to assure that they can continue to charge us higher prices than they charge the rest of the world.
Thirdly, let’s do away with the best retirement program in the world. You know the one that our Senators and Representatives enjoy. They put nothing into it except our tax dollars and, upon retiring, they receive the exact same pay as those who are currently sitting in Congress. What a great deal. Congress gives themselves a pay raise and the retiree’s get the same one. Perhaps if that pension was no longer available and they had to exist on Social Security, we wouldn’t have the “proplem.”I have two pensions. I wish that either one of them was like the ones our elitists in Congress have.
There is a fourth that would help save Social Security. That being that we stop giving benefits to those who have not earned them. Drug addicts and alcohol abusers are considered to be suffering from an illness. If that’s the case, give them treatment. If they don’t take advantage of it, stop the benefits they receive. I don’t know what category illegal aliens fit into but they can receive benefits too.
This may be a simple cure for what ails our Social Security system, but it seems to me that it’s one that would work.
Don R. Gugliuzza
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5 Comments Add your own
1. Jeff Rushing | February 29th, 2008 at 8:34 am
Good comments,I would add that possibly raising the cap on the amount that gets taxed would help.Slowing the rate of increases(not eliminating them) would help as well.Social Security was never intended as a retirement in and of itself.HERE IS THE BIG PROBLEM.WE HAVE ANOTHER PROGRAM THAT IS BEING
CONTROLLED BY THE GOVERNMENT.The federal government
has proven over and over again that it is the most inefficient body
on this planet.We need to seriously consider privatization this would take control out of the governments hand.Think about it
2. Don R. Gugliuzza | February 29th, 2008 at 9:45 am
Yes, I agree with you about raising the cap. I can see no valid reason for capping the payments.
I don’t like Bush’s idea of privatization. The stock market is too volitile and even knowledgeable people can and do lose on the market.
Creating a public entity like the U.S. Postal Service, Amtrack and the Illinois Toll Road Commission isn’t such a good idea either.
The U.S.P.S. keeps buying gas guzzling vehicles for their route letter carriers instead of replacing older ones with hybrids.
Amtrack seems to find the most remote and inaccessable sites for their depots. Re: In New Mexico, the Amtrack station isn’t in the most populist city in the state, Albuguerque, but in Lamy which is around 70 miles away. People board the train there and then get a scenic tour of Albuquerque. Doesn’t make sense
The Illinois Tollway Commission exists only to provide something to do for big campaign contributers. They provide no service that can’t be provided by the Illinois Department of Transportation.
These are just a few of the examples of mismanagement by public-private entities that are in the same mold as governmental entities.
3. Gary | March 3rd, 2008 at 8:16 am
HERE`S ONE WAY. KICK ALL THE DEADBEATS OF THAT DONT NEED IT. HAVE YOU EVER DROVE BY THE SOCIAL SECURITY OFFICE AND SEEN ALL OF THE NEW CARS AND SUV PARKED THERE ? ITS THE SAME AS WHEN YOU DRIVE BY THE PUBLIC AID OFFICE ! WANT TO TELL ME HOW ALL THESE SLACKERS CAN BUY THEM ? I ALSO WANT TO KNOW HOW ALL THE PEOPLE WHO CANT SPEAK ENGLISH CAN GET IT WHEN MOST OF THEM ARE YOUNG ?
4. Samal | March 3rd, 2008 at 8:20 pm
You haven’t provided a fix for Social Security and you have provided some dubious or false information. Let me provide some clarification/corrections.
Overall you are right on the mark in implying that the government spends too much money but to address your points directly:
First: The real problem with Social Security is that it is a pay-go or pass through system and future demographics are turning against the program. Rather then providing a bold workable solution minor tweeks have been passed in order to avoid pissing off special interests. Pay go systems are called “Ponzi Schemes” when tried by an individual and are quite illegal as they always require new money to pay off old promises, something that is not always possible.
Regarding the trust fund, unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets to secure workers’ paid-in contributions. Instead, it holds non-negotiable United States Treasury bonds and U.S. securities. This is the only option allowed under law and it is not as if these are just IOU’s the holdings of “special” government bonds are an investment that returned 5.5% to the trust funds in 2005.
About the same time we were tweeking retirement age and an increase in payroll taxes Chili was in the same situation only they decided to fix their system rather then just put off the problem as we have. They transferred to individual accounts with a minimum guarantee for disability and retirement. They created wealth that will last generations allowing them the most generous retirements in South America.
Second: Medicare has no effect on Social Security. It does however affect overall government spending. 40 years ago we as a people decided, for better or worse (and bureaucracies are almost always for worse), that we were going to cover the medical needs of our senior citizens. Today no medical plan is complete without a prescription plan and so it has to be with Medicare.
Contrary to what you have written the plan was not written by the drug companies. While the plan does prevent Medicare from negotiating directly with the pharmacutical companies it puts this burden where it belongs, on the insurance companies that manage the plans, companies that have years of successful experience, a motive to actually reduce costs (which government employees never have) and often have more total nationwide subscribers and thus more bargaining power then Medicare without having to establish another costly bloated bureaucracy. In doing this the program has managed to be the first entitlement plan ever that has reduced costs to both the government as well as the beneficiaries while increasing the available number of medications and pharmacies. In comparision the VA does negotiate directly and has a limited list of drugs as well as limited pharmacies available. Aa a matter of fact in the past two years there has been a migration of Vets from the VA plans to their Medicare Rx plans. Senior citizens overwhelmingly approve of the system as it is.
Canadian drugs are cheap becaues the Canadian government subsidizes the costs and they purchase in bulk. However they have a limited list of avaliable drugs, which is why many Canadians cross the boarder for medications unavailable in Canada — often newer more expensive medications that have the potential to extend lives. Because of the lost tax dollars and the real possibility of shortages of medications for Canadians prior to the passage of the Medicare Rx plan Canada had passed restrictions on pharmacies prohibiting their selling to foreign customers. How long did you think they were going to allow that?
You are correct that drug companies have benefited by increased sales of medications. In a rational world with objective observers this would be a good thing as it means the patients are taking needed medications thus improving their health and possibly reducing the cost of future Medicare payments, after all 10 years of Lipitor is quite a bit cheaper then bypass surgery, diabetes medication is far cheaper then the cost of an amputation. In addition the increase in sales means a direct increase in funds used for R&D. If profits are artificially limited by government intervention we will end up with research limited to Viagra, hair loss drugs and botox, medications that have proven sales and profit track records. We will also be like Canada and have limited availability of medications.
Third: You on target with this one, but it isn’t really a Social Security cure, other then improving the overall budget. I would add one more thing, term limits. The Federal Government should never be a politician’s only source of employment history, they need to get a job and see how the rest of us have to work to get by.
Fourth: Your information is out of date, a few years back Social Security changed the rules so that alcoholism and addiction were no longer qualifiying conditions alone. Those receiving benefits were moved from the program to work or other state aid programs.
Fifth, from the comments above: Slowing the growth rate of future benefits will help the program a bit and will put the program more in line with its original intent, however those already receiving benefits are already receiving an annual COLA based on a lower index.
Allowing payroll taxes on every dollar earned would fundamentally alter the program. As it stands now everyone makes payments for a calculated benefit with a maximum payment available. This provides a retirement payment that returns about 2.2% on average on the taxes paid. If you were to increase the tax without increasing the resulting benefit you would have another welfare system rather then a pension type system. If your belief is that the rich should support the poor in the system then the current plan needs to be scrapped as that is not the way the law is currently written (and maybe read some history on socialism).
A workable solution to Social Security would be something that allows individual ownership of a portion of the funds along with guarantees, including guaranteed securities (as they are now). Interestingly this change would benefit future generations of minorities and the poor in a far greater manner then it would the evil rich as the life expectancy is often less for these demographics. With individual ownership those funds not paid out would not be absorbed into the system as they are now but would be passed to the childres of the beneficiaries. This would create a legacy unknown or even undreamed of for the least wealthy Americans. Strange that they were the one’s primarily targeted when the fear mongers opposed attempts to debate a true long term fix of the system.
5. Don R. Gugliuzza | March 4th, 2008 at 11:46 am
You’re right on many accounts regarding my article. However, many of Social Security’s problems have been caused by The president and congress hiding some of their deficit spending by “borrowing” surpusl funds from the trust fund. In 2004, $157 billion was taken out of the trust fund and put into the budget. At that time the fund was owed $5. 7 trillion. With all of that, we still have a huge budget deficit. Now at some point the feds will have to come up with the money they took from the fund. To do this they will have to cut programs or raise taxes. Neither solution will be politically advantages to those who would be sitting in the White House or Congress. I shudder to think what “solutions” they might settle on. You can rest assured that they will come up with something that doesn’t cause a riot with the electorate and they will have someone to use as a scape goat.
So, maybe the answer is not in makeing sweeping changes in the Social Security System, but in making our government live within it’s means like we have to. They have to stop spending money we don’t have to give them. Provide the basics for our citizens and let the citizens work to provie the frills for themselves.
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