William Thien

Time to Re-Evaluate Social Security

Posted on: January 23, 2011

Is it time to re-evaluate Social Security? Is it time to privatize Social Security?

Since these questions seem to re-introduce themselves every couple of years, perhaps it is indeed time to have another look, another serious, painful look. Like the nagging, recurring pain of an injury reminding us to treat that area of our bodies with care, perhaps the recurring questions about Social Security are trying to tell us something about our economy. The mere fact that questions, serious, valid questions can be raised over and over again about Social Security may be an indication to us something is wrong with Social Security.

One of the most egregious aspects of Social Security if you are single, for example, is that you pay into it for the duration of your life and if you die at the age of 56, nobody sees a thing. No individual receives the benefit of any savings in any private retirement account. You cannot will your savings to another family member. Your savings simply vanish into a common pool of funds.

Of the various entitlements that many receive in The United States, Social Security seems to be the one that most believe needs re-evaluation. During the last ten years there have been numerous discussions about privatizing Social Security and even ending the “entitlement” altogether.

Originally designed to provide a means of retirement income for those who worked and paid taxes all of their lives but had no retirement savings, Social Security has had its scope broadened at times to cover circumstances such as payments to chronic alcoholics and drug users who are unable to work due to their addiction, a payment which many would say is an abuse of the system.

Not only is the cost of the payments to recipients burdensome given those circumstances, the cost to administer the program is enormous. Addicts must be screened and recommended for Social Security benefits, deemed unfit to work by a health care professional. And who pays for that? Whew, now things are really becoming expensive.

But even more egregious is the fact that unlike a private retirement account, Social Security evaporates upon death. You may pay hundreds of dollars a month into Social Security and if you have a heart attack at the age of sixty and you are single, for example, there is essentially nothing there. Furthermore, if you die at the age of sixty and have a spouse, he or she only receives a monthly stipend of a few hundred dollars. And the time that he or she receives that benefit may vary. So they may be left without any payments for some time.

There is no individual account anywhere holding all of your savings. It’s a common account. Your wife or husband cannot withdraw all of the money you put into it. The monthly check she receives may not be enough to survive on. But had that same amount of money been put into a private retirement account throughout the duration of your life, chances are that he or she would be well cared for the rest of their lives. But now they simply receive what inflation has made a few dollars a month, barely living expenses for many.

Another problem with Social Security is that it is the foundational time line the government uses to determine when Americans should retire. What if you work until you are fifty years old and decide you want to retire, then? Are you eligible for your Social Security? No. And because of this the government also says in many cases you cannot use your private retirement account to retire at this time, either, unless you want to pay a substantial penalty in taxes. In this case more than anything Social Security is a means of controlling your private wealth and savings. Originally intended to provide a means of retirement income, now Social Security is a life program designed to tell you when you can retire and it is also a form of tax, a particularly toxic form of tax.

Social Security has many positive benefits. But many people believe that it has outgrown its original design and become a sort of monster. With the baby boomers now beginning to retire and the population of employees contributing into the entitlement account rapidly decreasing, perhaps it is indeed time to re-evaluate Social Security.

Finally, the main problem from my perspective with Social Security is that it is a poorly performing investment because the return on the investment (ROI) is by comparison to private retirement accounts generally very low, extremely low actually. And so many new definitions of eligibility have been created since its inception that Social Security also pays out less and less per capita annually. Everyone wants a piece of the Social Security pie. And when you have a government that basically has been getting themselves re-elected by promising the various pieces of the “social pie,” you start to see a smaller and smaller slice every year.

So yes, maybe it is indeed time to re-evaluate Social Security. Some might say it is time to end it altogether.

Copyright © William Thien 2010

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4 Responses to "Time to Re-Evaluate Social Security"

“Originally designed to provide a means of retirement income for those who worked and paid taxes all of their lives but had no retirement savings, Social Security has had its scope broadened at times to cover circumstances such as payments to chronic alcoholics and drug users who are unable to work due to their addiction, a payment which many would say is an abuse of the system.”

To me, this paragraph zeroes in on the most egregious but most easily remedied dilemna of social security; a surprising percentage of current recipients fall into this “S.S.I”—– drug addicts, as well as many who fall under the even more-abused ‘mentally-ill” category; anecdotally speaking, i can’t tell you how many east-side bohos, ‘artists’, ‘club musicians,’ retired batenders, etc., ad infinitum, I know who now collect S.S.I., and have been doing so for quite some time, some from their late 20s to the present.
But I disagree with your idea of privatizing s.s; I sympathize, but my reservations are based to a fact that hinders all large entitlements, however burdensome: the mere fact that s.s. is so entrenched in the culture, and relied on, and used as a source of payment, any radical reduction or realignment of such a system invariably creates havoc in a million ways that one cannot anticipate. I mean, if we took it away tomorrow, industries would fail due to lack of payment, and tens of millions of people would be destitute. I know you’re not suggesting something that radical, but i’m just saying you’d have to consider the level of the disruption accordingly. unfortunately, reforms have to be gradual, tho i realize that approach comes with its own great limitations. (i’m not of the bent that’s pro-privatization; i’m no socialist, but i’m also aware that, historically speaking, economic chaos, inefficiency and outright destruction has come as much from the private section as it has from government-administered business, entitlements, institutions, etc.; i’ve also learned that pointing out this readily evident historical truth will make you a very controversial and contested figure on libertarian blogs and commentary logs).

REally, the only way out of these messes it to wait until the next economic boon comes along and then —— and only then! —— can you instigate much-needed reforms in govt. entitlements without reeking havoc upon the masses. Though, of course, such boon times are when the exact opposite happens, and unfeasible entitlements expand rather than trim themselves down.
Ahh, so nice to have these four-day weekends to sit back and impart wisdom while waiting for kickoff! 🙂

You have offered a very thoughtful perspective. Ending Social Security payments abruptly would indeed have a catastrophic effect upon any number of businesses which are formatted to profit from the program.

I do believe however that we must somehow address the abuses of Social Security regardless of whether or not any particular type of business will be effected negatively. That is the risk of doing business. And if you structure your business like a lamprey to suck off of the American public, then of course you should expect that it won’t last forever.

Perhaps a simple redifinition of Social Security to cover only those it was once originally chartered to do would suffice.

RE: Perhaps a simple redifinition of Social Security to cover only those it was once originally chartered to do would suffice.

Yes, unfortunately, that I believe is the most that can be done right away; anything more what unleash too much of that aforementioned havoc —– to the extent that it would render the attempt at change to be not worth it.
Like I said, i think this needs to be done once the next boon begins and is well under way; windfalls have a way of allowing for reforms in that they pad and protect the masses from the disruption and scarcity that quick change often begets.
But I think the current spending and budget shortfall problems are deeper than just curbing entitlements; lately, I’ve begun to wonder about how much legislation like NAFTA and GATT have to do with our generally unsound economic system; I mean those two acts are possibly a perfect example of government corruption and propaganda writ large: just who do those programs benefit? if you recall, when they were introduced and pushed during the earliest days of the first Clinton administration, their promotion was couched in fuzzy but optimisitc rhetoric about the ’21st-century economy’ and how they and prosperity and hip progressivism all went hand-in-hand, to the point where it was seemed to be self-evident that NAFTA was for the west’s greater-good and that anyone who disagreed or even strongly questioned was in the grip of heresy and retro, old-fashioned stubborness.
But what did it bring: a huge increase in yearly profits for an already entrenched American elite —– and wage depression for the rest, not to mention a loss of traditional blue-collar jobs. yes, it’s not easier for the lower and middle-classes to buy a pair of Nike’s and a flat-screen TV for about 20% to 30% less than they did proportionately twenty years go, but maybe not such a deal if your wages are proportionately less than they were 20 years ago!

Thank you for your perspective on Social Security.

Redefinition of Social Security or a return to its original charter as I stated previously may indeed be what is required.

And on your other note, I do recall Ross Perot emphatically proclaiming that there would be a giant “Sucking Sound” heard of jobs leaving the country upon the ratification of NAFTA. So, Americans were thoroughly warned about the effects of NAFTA.

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