Rule Five Social Security Friday

Stumbled across this the other day over at Issues & Insights, which is becoming one of my favorite reads; this time they are describing how President Biden(‘s handlers) fiddle while Social Security burns.  Excerpt:

Treasury Secretary Janet Yellen responded to the news about Social Security that “the Biden-Harris administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed.”

But in his latest budget proposal, Biden offered no proposals whatsoever to shore up Social Security or prevent a looming 23% cut in retirement benefits that current law will require once the Trust Fund is emptied.

As bad as this seems, Social Security’s financial picture is actually far more dire. It’s likely that the Trust Fund won’t even make it to 2033.

The Social Security trustees have had to downgrade the Trust Fund repeatedly for the past 40 years when their economic and demographic assumptions turned out to be too optimistic. Back in 1983, for example, the trustees promised that the Trust Fund would remain solvent through 2058. By 2003, they were saying it would only be solvent until 2044.

And why?  Because the entire rotten process was a Ponzi scheme in the first place.  In 1960, there were over five workers for every person receiving Social Security.  Now there are two.  The whole thing is coming apart, and will continue to come apart, no matter what the Imperial City does, because of Stein’s Law:  What can’t continue, won’t.

But wait!  There’s more!

A Heritage Foundation analysis found that, based on current contribution rates, workers born in 1995 will end up paying an average of $404,337 into Social Security. What can they expect to get back when they retire? If they live to be 80, they’ll receive just $227,513 in pension benefits – an effective rate of return of -2.31%. Even if they were to live to 90, they still wouldn’t get all their money back.

If that same $404,337 had instead been invested in a private account with an annual rate of return of just 4.79% a year, these workers would retire with nest egg valued at more than $1.2 million, Heritage found. And unlike with Social Security benefits, they can pass any money they don’t spend in retirement to their heirs.

Giving young workers the option to shift their payroll taxes to private accounts would not only provide better retirement benefits, it would also relieve Social Security’s massive long-term deficit problem.

Look at those numbers:  Invest $404,337, receive back $227,513.  If a private investment firm showed this exact same performance, they would be out of business, the directors disgraced, and not unlikely that some people would be perp-walked.  But if it were a private investment firm, at least the ill-advised people who invested in it would have had a choice.  With Social Security?  There’s no out.  Unless, of course, you’re a government employee.  They’re exempt from this nasty Ponzi scheme.  Why, do you suppose?

I’ll give you my best guest:  Because they knew it was a raw deal.  Government employees are, at this juncture, about the only people in the United States who enjoy generous defined-benefit pensions.  Most of us have to save for our own damn retirements.  If we’re lucky, we might work for a company that kicks in some matching dollars.  If we’re careless and irresponsible, we may have to depend on a failing government Ponzi scheme.

It gets worse.  A big part of this started in 1964, when the Imperial City decided to move Social Security “Trust Fund” receipts into the general fund.  This meant that our elected officials were free to spend that money, as they usually do, to buy votes, and that since then the Social Security “Trust Fund” has not existed; it’s a box full of IOUs from a government that is thirty-two trillion dollars in debt.  In case you’re wondering, that’s about a quarter-million dollars per taxpayer.

“Well,” you might ask, “what’s your solution, Animal?  What should we do?”  Well, I’m a-gonna tell you:  Privatize the lot.  It’s too late for people like me, who is of the last cohort of the Baby Boomers.  But the only way any system like this will survive is to get the government the hell out of it.  Keep the withholding, if we must; but make sure every individual’s account is theirs, with a balance they can check and track, and with some (at least) choices of how to manage that money.  A government-mandated 401k would be better than the train wreck we have now.

The article concludes:

One way or another, Social Security has to be touched. The only question is: Who gets burned?

I’ll tell you who gets burned.  We do.