April 30, 2005

Sad Truths

Jimmie at The Sundries Shack is not pleased with President Bush's remarks about Social Security:

So instead of an egalitarian system where you get back what you contribute plus some interest on your “contribution", we’re going to have a system where the rich again subsidize the poor? Instead of the regular old Ponzi Scheme, we’re going to get a Ponzi Scheme that redistributes wealth, too?

Ho-ookay. That sounds great, doesn’t it?

Further, from what I can see, folks in my age bracket are still hosed because the money we’ve been contributing all our lives still won’t be there when we hit retirement age. Even if it is, it’ll give me a return that’s less than if I stuck it in the average bank CD.

Did I mention that personal savings accounts look like they’re completely and utterly dead?

Man, how could I not be in favor of a plan that takes the same amount of money from me it always has, promises me no better return than the most rudimentary investment plan if I actually see any of my money at all, and guarantees to penalize me more the better I do financially in life.

Sign me up right away?

Look, I am not an accountant. I’m just an average American who sees 12 percent of his paycheck Hoovered away and used to finance the rest of the government (and I’m already losing a good hunk of change to finance that). My President has campaigned twice on the promise that he will reform the system and make it better. He’s promised to work hard to give me some control over some small pittance of the money the government already takes from me because, let’s face it, the government sucks as an investment banker.

So far he’s gone back on both of those promises. And I’m pissed.

The sad truth is the government needs Jimmies' and my, and other American's Social Security "contributions" to pay for current retirees. That's what's meant by Pay As You Go (PAYGO). It's the reason Bush only talked about allowing younger workers the option (never mandatory, only voluntary) of putting a portion of one's SS contribution into a personal account. Money would still be needed to pay current and future retirees.

Younger workers like Jimmie and myself are stuck with a system that claims to be a retirement plan* but is really an intergenerational welfare program. That's what it was set up to do, and that's what it is still today.

Jimmie goes on ranting:

You know something? I don’t want any more of my money going to prop up a lifetime of someone else’s stupid financial decisions. I don’t expect any of you to do that for me. I’m sick and tired of hearing how people need Social Security because that check is all they have. I need that money, too. I have rent, car insurance, and utility bills I need to pay and I have some small hope of building my own little nest egg so I’m not one of the people who my children are going to have to support in 40 years. If other people have frittered away a lifetime of savings, tough on ‘em.

I feel his pain. Years ago, I participated in a SS discussion session put on by the Pew Charitable Trust. It was full of ordinary people like myself to discuss how to make SS better. I volunteered to give up all my SS "contributions" and any future claim on them in exchange for a personal account. No one in my group would let me. They thought that someday if I failed to properly fund my retirement I'd come crawling to the government for help. They had no faith that I would take responsiblity for my success or failure. They assumed I'd demand government (i.e. taxpayers') help because that's what everyone does. These people weren't policy wonks. They were just ordinary, concerned citizens. Such cynicism towards a fellow American yearning to be free might be the biggest obstacle facing President Bush. And I don't think he even realizes it.

"So It’s Now a Wealth-Redistributing Ponzi Scheme?"

*James Buchanan wrote (paragraph 40) that SS is accepted because the public is led to believe individual contributions fund one's own retirement instead of current retirees. He dubs this "an illusion of the Puviani sort."