No matter how popular, Social Security is a terrible investment
Social Security is often called “the third rail” of public policy.
Any politician who suggests any criticism or change in SS – other than increasing benefits – is on the road to political oblivion. I am not a politician, so I have no need to pretend that Social Security is 1) actually a “trust fund” set aside for future payouts, 2) an efficiently run government program or 3) a good investment.
The folks in Washington often refer to the Social Security Trust Fund – implying that there is a set aside of money coming into the “Fund” sufficient to pay future recipients – that the “Fund” is self-perpetuating and sustainable. In fact, there is no “Fund” – only an item in the overall federal budget. That is why every member of Congress – and the folks in the White House – know that the outgo far exceeds the Social Security income. The disparity is so large that Social Security – as a program – is unsustainable. If left on its current course, Social Security will crash and eventually bring down the entire national economy.
Social Security is a kind of Ponzi Scheme in which more and more money is required to meet the promised payments to current recipients – and the growing demand for money is outpacing the taxpayer’s ability to pay. In 1940 – three years after Social Security was started – there were 42 workers supporting each recipient. Today, there are only three workers supporting each Social Security recipient. Like every Ponzi Scheme, there comes the point where it crashes.
So far, the ability of those in Washington to wring more and more money out of the taxpayers enables them to brag about the Social Security as the greatest government benefit program. Of course, that is the same thing folks were led to believe when they invested with Bernie Madoff. (If you are not familiar with Madoff, look him up.)
With Social Security about to belly up in a few years, President Biden proposes to raise taxes to extend the viability of Social Security – essentially kicking the can down the road. Eventually, there will be no more roads left. No matter to Biden or the members of Congress, they will have been long gone before the disaster hits.
Yep! There is no trust fund. Social Security has to be paid out of current taxes and borrowing.
Social Security includes waste and corruption
Social Security has become such a “sacred cow” that it is politically perilous to even suggest cost cutting measures involving waste and corruption. The word “cut” and “Social Security” can never be uttered in the same sentence.
If a senator announced a plan to cut the waste or corruption out of Social Security, an opposition senator would accuse his colleague of taking bread and medicine away from those dear old senior citizens. (I kept partisanship out of the previous sentence knowing that you could figure out the political affiliation of those senators.)
According to the Committee for a Responsible Federal Budget, the payment to undeserving or dead folks runs around $3 billion per year. Others set the “corruption AND waste” figure at closer to $15 billion per year. Corruption and waste in government programs is enormous because no one in government is effectively supervising expenditures – and that is because it is not their money.
Politicians actually benefit by not being prudent in spending. And keep in mind that those who cheat and steal are as supportive of government spending – and the candidates who spend irresponsibly — as those who get legitimate payments. They are all in on the take.
Social Security is a lousy investment
Two things are true. Social Security income is important and often critical to senior citizens – and it is lousy in terms of the Return on Investment (ROI). It is a losing investment. Basically, the money you receive is worth a lot less than the money you put into Social Security. Even worse. It was a forced investment. It was a bit like a stockbroker forcing you to invest in a stock that was a sure loser – even worse, since the stockbroker did not create the losing investment like the government did with Social Security.
If you had put that money into safe blue-chip stocks, you would have been FAR better off. If Social Security was a privatized investment – with safeguards – your Social Security payments today would be up to eight to ten times greater. Imagine getting $18,000 per month instead of $1,800.
To put it simply, the dollar that Uncle Sam took from us was worth a LOT more in purchasing power than the dollar he is giving back decades later. The dollar I gave to Uncle Sam back in 1965 to invest in my retirement was worth $8.55 in purchasing power when compared to the dollar Sam is sending me each month. To make my investment in Social Security a breakeven point – no gain – I would have to receive 8.6 times the amount I receive today.
The Urban Institution estimates that the average person will pay $300,000 into Social Security over a lifetime – and will receive approximately $277,0000 in retirement benefits. You lost $23,000 right off the top. If you had put that money in a mattress – instead of giving it to subsidize Uncle Sam’s spending sprees — you might have been better off.
One thing everyone on Social Security knows is that the return on the investment is not nearly enough to cover the costs in retirement. It is not a livable income. You cannot survive – meet basic needs — on Social Security alone, even if you cut costs to the bone.
Some describe Social Security as a sort-of private investment program. It is YOUR money – going in and coming out. (Wait while I stop laughing. It is not “your” money when you have no choice in spending it.) It is not a welfare program. That creates a problem. As a long-term investment program, everyone who puts in can take out – no matter how rich they may be. Social Security payments are not means tested. If they were means tested, there would be more money for the seniors who really need the Social Security income – AND an overall reduction in the ever-increasing taxpayer cost of supporting the system.
Even though it is not officially a welfare program, it has the impact of one. Seniors are grateful for the pittance they receive – and protective of the pittance by voting against those who would reform Social Security and make it a better investment. They have been fearmongered and trapped into Social Security dependency, much like many poor folks have been fearmongered and trapped into generational welfare dependency.
Social Security needs responsible reform, but it will not happen as long as the irresponsible have the upper hand with the voters.
So, there ‘tis.