For this weeks entry into the Book Notes project, I have chosen Social Security . I think this is an important topic for us to look at for two reasons. First, Social Security is running out of money quicker than the government is telling us. Secondly, how the government handles Social Security is directly related to how it will administer Obamacare.
Mr. Toomey points out that in 2006, the U. S. Government paid out $546 Billion in benefit checks, or 21% of the Federal Budget. Toomey states, "America's Social Security Administration spends more money than the entire government budgets of all but six of the world's countries. It is bigger than the GDP of roughly 90 percent of the world's countries." No one expects these amounts to decrease as more and more people are retiring. As the Baby Boomers continue to retire, this is going to get worse. Just this week, we found out that this year Social Security will pay out more than it takes in. This devastating news was cushioned by the idea that we shouldn't worry, Social Security has a number of I.O.U.'s from the federal government, so it can just start cashing those in.
Who owes the money to Social Security? Taxpayers. If the federal government is going to "start paying itself back" its only going to be spending more tax dollars, or more borrowed dollars on Social Security. Politicians in Washington have been raiding the "Social Security Lock Box" for a very long time. The concept that you are paying towards your own retirement through Social Security is another convenient lie that politicians want you to believe. Look at your pay check this year. As you see the "Year To Date" portion of Social Security increase through the year, realize that none of that money will be left in Social Security at the end of the year. The government takes your money to write checks to retirees. We don't usually think of it as a redistribution of wealth program, but it is. Working employees are taxed to give money to seniors who have retired. This is as much a redistribution program as welfare is. It just has a prettier name.
I am 36, and I fully expect Social Security to be non-existent by the time I reach retirement age. Unless we do something to reform it soon, I will be right. There is only so far you can raise payroll taxes, only so far you can push back retirement age, and only so far you can scale back social security benefits. Mr. Toomey goes into great detail to explain Personal Accounts. No one currently being paid Social Security benefits would be forced into these. Workers who joined the workforce past a certain year would be able to participate in. Then, those workers taxes would be invested in the market through a number of government approved funds that the worker could select from. As the workers money grows, he or she owns the fund. If they die, their survivors can inherit the fund (something impossible with Social Security). And as the fund grows, there is more capital available to potentially enter the market place. Where would our economy be if this had started back in the 1990's? Imagine a world where every worker in America was invested in some way in the stock market, and every worker was contributing to growing the economy.
If I am a little vague on details, that's intentional. This is still a conversation we need to have. As Pat Toomey points out, a number of countries have tried this and been very successful. We could pick and choose from their plans those things that most appeal to the American worker.
This is equally important because if the government can't manage social security, what will happen to Obamacare? Under Social Security, a worker gets paid after they retire. Under Obamacare, checks will be constantly written for retirees, workers, unemployed, new born babies, and the occasional illegal immigrant. Obamacare will require an order of magnitude better management, and more money. Does anyone really believe our government is capable of handling it?
We should be talking about Social Security for the rest of the year, up to and after the November elections. We should force Democrats to explain how it works under the current "status quo" and how Obamacare isn't going to suffer the same fate. Then we should show that Republicans have already offered solutions, but Democrats have hid behind the "status quo".