Will politicians steal Social Security’s $2.7 trillion?

Social Security is not in “trouble”, except that it has vast wealth in reserves, and politicians want to steal this treasure trove (designed only to insure future Social Security benefits), and use it for something else. That something would probably be tax cuts for the rich by the GOP, or more redistribution downward from the middle class to the poor by the Democrats.

SuttonWhen I combine Treasury Note rates, Cost of Living, Interest on the Social Security fund and the total reserves (in Millions) of the Trust Fund, the resulting Trust Fund Table  demonstrates the steady growth of these reserves from year to year – now exceeding $2.7 trillion total, invested in special Treasury notes.

The table also shows that reserves decreased from 1976 to 1983 (except a small increase in 1982), but since 1983, reserves have grown 1,000%. Every year since 1983 has registered more taxes (FICA) paid, than benefits distributed.

The deficit scolds want benefit cuts, higher retirement age, to accomplish what? Even larger reserves? They never mention that every other government program shows a deficit year after year, while Social Security “makes money.” Today’s trust fund is the largest in its history and growing every year.

If we go back to a Google comments post 11 years ago on Social Security Reform, it shows not much has changed since George Bush was then trying to privatize Social Security. My suggestions then were to make changes to increase public acceptance of the  program, improve economic fairness in benefits, and allow a Social Security personal fund to be transferred to the personal trust fund of another person or persons. It is interesting reading from today’s perspective.

Set the interest rate for Social Security bonds and payments at 3.3% above the current inflation rate, adjusted quarterly. This reform will guarantee a 60% or higher payment to every retirement recipient at age 65 and it will maintain the solvency of the trust fund and payments to personal accounts.

Raise the limit on contributions to $250,000 of annual wages, instead of the current cap of $90,000 … these high-income individuals will receive a commensurate return on their increased payments.

Base recipient payments solely on the amount contributed over their lifetime of work – in short, the sum of their set and voluntary contributions, employer contributions and interest earned.

Personal accounts benefits will be based on the same formula – 3.3% above the current inflation rate.

Permit the designation of all individual contributions to be placed in the trust fund of another person or persons. For example, the $86,261 – accumulated by the … wage earner … could be transferred to the trust fund of a spouse, children, grandchildren or other loved ones.

This voluntary allocation of private accounts would enhance their benefits and this estate would be part of their contribution base for future, similar endowments.

Remove all federal, state and local taxes on the payments of benefits to trust fund recipients. This reform for personal accounts is in exchange for sacrificing the interest earned by their contributions over a lifetime, tax free.

Invest the trust fund, not just in United States Treasury notes, but in municipal bonds, which are guaranteed by the state or local tax base. This would eliminate an enormous premium on interest rates, now paid by governments, and end excessive bond counsel and other fees, encouraging new school and road construction, and repairs to the nation’s infrastructure.

Allow the voluntary contribution of more than 6.2% by individuals. These voluntary pension private accounts would form part of the base of their retirement benefits. All funds and the interest they earned would be payable in the same manner as an I.R.A. – withdrawn as early as 59 1/2, with mandatory deductions at age 70. These disbursements would be taxable as withdrawn, and loans would be permitted under the current 401K rules.

Happily, some of my old ideas are now new ideas by others. This most recent set of suggestions echoes 2005, with a much more scholarly vehicle: Comprehensive Plan to Confront the Retirement Savings Crisis

3 responses

  1. […] – Citing a story in USA Today which reported that a rash of retirements in 2009 is pushing Social Security to the brink, Johnson said the retirement age needs to be raised perhaps to 70 or 72. “This […]

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  2. […] a story in USA Today which reported that a rash of retirements in 2009 is pushing Social Security to the brink, Johnson said the retirement age needs to be raised perhaps to 70 or 72. “This […]

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