All the lies about the Social Security “lock box” are now on full display. This is the year we will start paying out more from the SS program than we took in. We’ve gotten here even earlier than predicted. This wasn’t supposed to happen until 2017. Whoops…
Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds— which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.
Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.
But, wait! We have $2.5 trillion in there and it’s earning interest. It’s real money. We’re fine, right? Right. Pull this leg and it plays “Jingle Bells.” This is the mess conservatives have warned about for so long. The lock box hoax is nothing but a promise from the government (us) to pay us. Yes, the bonds will be paid, but that shouldn’t ease your anxiety. The money has to come from somewhere. Government only has two choices to get it:
1) Taxes.
2) Borrowing.
That’s it.
We are required to raise that money through borrowing or taxing until all those bonds are paid out. Say, “hello” to even more debt. Then…
Social Security’s financial problems have been looming for years as the nation’s 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits — and stops paying payroll taxes — Social Security’s trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program.
At that point, unless something else is done, government will be required by law to pay SS recipients greatly reduced benefits (approximately 27% less).
If you had devised a retirement plan like this for your employees, you would go to jail. If you had talked your spouse into a personal retirement plan like this, you would be divorced. “Honey, let’s spend our retirement money on a flat screen and a trip to Europe. Don’t worry, I’ll put an IOU in there. I’m good for it. ”
The answer is to transition to private accounts so people can invest in the private markets. Then when they retire we won’t have to raise taxes or borrow money to pay them. Yes, there is some risk involved and steps must be taken to make sure the accounts are diversified, and made more conservative as retirement age approaches, but it’s the only way out of this. We now have at least 20 countries who are trying some form of privatization of government retirement accounts. We should take from the best and make it happen here. Otherwise, get ready for higher taxes, bigger debts and reduced benefits.
Hey, don’t miss the Massa Meltdown and Nancy Pelosi as a used car salesman. Check it out.