Monday, January 17, 2005

Saving Social Security

I saw several Democrats on the Sunday shows this weekend denying that there is a "crisis" in Social Security that needs to be addressed. Ted Kennedy, seemed sober, but none the less tried to sell the bizarre theory that President Bush has dreamed up this problem and that there is no crisis.

It is probably not best to get into a Semantic argument about what constitutes a crisis so I'll leave it to great minds, like that of the Mass. Senator's to come up with an appropriate description. None-the-less, it is an undeniable fact, that as currently constituted the program will not have enough funds to pay out the current level of benefits to anyone who is 35 years old or under and working today, along with every single person entering the workforce from this day on for the rest of time. Al Gore's lockbox not withstanding.

What happened? Iraq? The tax cut? George Bush's spending? Sorry, none of those benefits to the moneyed elite in our society caused this looming crisis, er problem.

As the democrats hysterically cry about preserving FDR's legacy, its instructive to focus just on this issue. The fact is FDR and the boys created one of history's greatest Ponzi schemes when Social Security was invented decades ago. One can argue that they did it with the best of intentions, and I won't disagree with them here. The fact remains, however, the program was created to take wages from current workers and pay for the retirement of older workers, with the promise that future retirees would receive similar benefits from their children in the future.

Ensuing generations of politicians along with the full complicity of the American public, added to program benefits as a painless way of winning votes using the future wages of workers that had yet to be born. Political genius, really, but a domestic policy disaster should birthrates ever begin to decline.

The program also had a side benefit for the Democratic party in that it created a whole new dependent class. Grandma could now be counted on to vote for the party that would protect her retirement and keep her out of the home and off of the streets.

Social Security was already "saved" once in 1986 when a bi-partisan group of Senators changed the funding formulas and tax rates for Social Security so the the system would run a surplus well into the second decade of this century. The excess funds, were to be saved in a trust fund - Al Gore's non-existent lockbox - and drawn on when withdrawals from the system started to outpace tax receipts. Unfortunately, the trust fund was spent to reduce current deficits. In effect building a second level Ponzi sham on top of FDR's original scheme.

Today, since a Republican President would like to change the system, the New York Times and fellow Democrats insist that this second level scam, the Trust Fund, is really just a prudent investment in Treasury securities. Why should we be so concerned they ask? The answer is, of course, clear to anyone with a brain. When those securities come due, the American taxpayer will have to foot the bill.

In the most delicious irony of this whole tale, the Times and Democrats argue today, that we shouldn't borrow in the short-term to include some small degree of ownership in social security accounts. Yet, that is exactly what the system has been doing for the past two decades to fund current non-Social Security spending! The only difference being that the borrowing from the trust fund was ok with these folks when it expanded the government bureaucracy. Now that borrowing is proposed to shift the program towards ownership for each and every working citizen, borrowing has become the completely wrong strategy.

So, I ask you. Are these people truly on the side of the worker?

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