LETTER: Social Security not nearing bankruptcy, despite worries

Monday, March 14, 2011 | 4:12 p.m. CDT; updated 8:27 p.m. CDT, Monday, March 14, 2011

Like many in the "recent college graduate" demographic, I am concerned about whether Social Security will be around for my generation. There are a lot of talking heads out there saying it is "bankrupt" and an "inter-generational Ponzi scheme," but those counterproductive scare tactics just aren't true.

For it to be bankrupt, it would have to have run out of money. But, its board of trustees calculates that it will be solvent until at least 2037 and will pay benefits at 75 percent of full value indefinitely after that.

For it to be a Ponzi scheme, someone would have to be making a profit and hiding looming losses. But Social Security is one of the most stable and transparent government programs in history.

We will need to do something to fix Social Security in the next two decades to ensure that the folks of my generation (and beyond) receive full benefits. This should not include crazy cuts to benefits now because the federal budget has a major shortfall. Social Security is a separate fund that has its own stable inputs and outputs.

Let's work to make Social Security solvent. This could include raising the cap. It should not include raising the retirement age and definitely should not include moving the trust fund into the hands of private investors.

After what we've seen in the financial sector, that would make it a Ponzi scheme.

Zach Rubin lives in Columbia.

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Paul Allaire March 15, 2011 | 12:08 p.m.

Various talking heads have been talking about the impending catastrophe since before I was born.

And I do expect the local economic to improve somewhat sometime between now and 2037.

(Report Comment)
Jimmy Bearfield March 16, 2011 | 12:37 p.m.

Zach, the money that the self-proclaimed "greatest generation" and the boomers paid in was spent long ago and replaced with IOUs. As the Office of Management and Budget explained, "They do not consist of real economic assets that can be drawn down in the future to fund benefits." Your ability to collect SS will depend on whether future taxpayers are willing to cover those IOUs.

You should also keep in mind that the U.S. Supreme Court has ruled multiple times that Congress can reduce or eliminate your SS payments at any time, regardless of how much or how long you've paid in. SS is NOT guaranteed.

(Report Comment)
Paul Allaire March 16, 2011 | 12:54 p.m.

Well Jimmy, if your government decides to go insolvent, then yes, it's all out the window.

But at that point you will likely have other things to worry about...

(Report Comment)
Jimmy Bearfield March 16, 2011 | 1:06 p.m.

Paul, the feds could choose to ditch SS as a way to achieve solvency, just as it's a given that many municipalities will reduce or eliminate pensions for existing retirees because -- and this goes back to my point to Zach -- it's unlikely that taxpayers will want to pay more to fund someone else's retirement.

Either way, I'll continue to take my chances on stocks and CDs.

(Report Comment)
John Schultz March 16, 2011 | 1:28 p.m.

Hey Zach, I'm going to guess you don't have much money in the stock market at this stage of your life, so let me help you out a little bit here. I'm a middle-aged guy with an IRA and two 529 plans for my kids' college. Did they take a big dip after the recent stock market ride? Oh, you bet they did. Are my accounts back to pre-crash status. Oh, you bet they are, thank you very much. You don't get hurt if you don't jump off the roller-coaster.

I listen to a financial talk show host named Dave Ramsey and one of his favorite lines is live like no one else so later you can live like no one else (ponder that for a minute if it seems confusing to you). I'm squirreling money away now so I don't have to eat Alpo when I retire (Social Security isn't exactly living high on the hog) and I don't have to take a second mortgage to send my kids to the college you just graduated from, possibly without taking Econ 51.

The problem with discussing economics with most of the liberal persuasion is that they don't want to discuss math. Compound interest, dollar cost averaging, and long-term investing (i.e. not day-trading or chasing last quarter's winners) seem hard, but they are based on very simple mathematical principles and observing that the stock market has always recovered from cyclical swings. If I was closer to retirement or my kids closer to college, I would move my investments from mostly stocks to mostly bond funds. It's not rocket science people.

Here's a reintroduction to some of that math:

And the original column my letter above was in response to:

(Report Comment)
Paul Allaire March 16, 2011 | 1:33 p.m.

"just as it's a given that many municipalities will ..."

Isn't it hard to take anything that "will" happen as "given"?
It seems that's the whole reason you are on here writing about your contention.

(Report Comment)
Paul Allaire March 16, 2011 | 1:42 p.m.

And I might add that the value of any of anyone's stocks and bonds would become very questionable in the event that their government became insolvent. The same would apply even harder to whatever cash anyone had in their bank account.

Look at what a somewhat regularly repeating disaster just did to the Japanese stock market. Consider that and the fact that the Japanese government is absolutely nowhere near insolvency.

(Report Comment)
Jimmy Bearfield March 16, 2011 | 1:46 p.m.

Paul, if I believe that my government is headed for insolvency, I can always move my investments to currencies that are more stable. This option is unavailable with Social Security.

Also, I wrote "a given," not "given." Google around if you don't understand the difference.

(Report Comment)
Paul Allaire March 16, 2011 | 2:01 p.m.

How about we just use the word "imminent" instead. Which is not to be confused with "eminent". They are, however, fairly close. Google around if you don't understand the difference.

There are few possibilities in the future that I consider as "imminent". I did that more when I was younger. Either the world has become more complex or my outlook has. But that's ok because some things are still very simple.

For instance...

You're WRONG!!!

(Report Comment)
Jimmy Bearfield March 16, 2011 | 2:29 p.m.

Paul, how about learning grammar before fancying yourself to be a wordsmith? For example, question marks go at the end of questions, and periods go inside quotation marks.

(Report Comment)
Paul Allaire March 16, 2011 | 2:41 p.m.


(Report Comment)
Ellis Smith March 16, 2011 | 3:12 p.m.

In English this is true. In Spanish the question marks appear at both the beginning and end of the question, and the question mark at the beginning is turned upside down.

When you ask a question in Spanish, you REALLY ask a question!

At the rate things are going we may all be speaking Spanish in this country. Please translate the following into Spanish: "Where do I go to get a counterfeit green card?"

(Report Comment)

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