WHAT OTHERS SAY: Lawmakers should stand up for Social Security

Thursday, September 15, 2011 | 6:55 p.m. CDT

The U.S. Securities and Exchange Commission says a Ponzi scheme is an investment fraud that “involves the payment of purported returns to existing investors from funds contributed by new investors.”

Republican presidential candidate Rick Perry has called Social Security a Ponzi scheme.

Granted, Social Security is a pay-as-you-go system where current workers fund benefits for current retirees and disabled recipients. But it is not an investment. It is not a scheme. It is an insurance program.

Money collected through payroll taxes to fund Social Security is placed in secure U.S. bonds rather than a volatile stock market where it could be lost. The monthly checks paid out don’t go to investors. They go to retirees and disabled people to pay for necessities like groceries, health care and heat.

Yet some candidates, including Perry, try to scare Americans into thinking that Social Security is so broken that it requires a major change — like privatizing it or handing it over to the states to manage. Such changes would be irresponsible and unnecessary. They are not efforts to shore up the program; they are efforts to dismantle it.

Congress can extend the solvency of Social Security the same way it has done numerous times — by making small changes in the way it is funded. Today’s officials just need the backbone to do so.

In 1937, employees and employers each paid 1 percent of taxable earnings to fund Social Security. Over the next 50 years, Congress increased that rate 20 times, and in 1990 it stood at 6.2 percent. Lawmakers have not increased that rate at all in the past 20 years — the longest period in history without an increase. (A recent, temporary reduction from 6.2 to 4.2 percent was instituted to allow workers to keep more of their earnings in an attempt to stimulate the economy.)

A small increase in payroll tax or lifting the cap that imposes the tax on only the first $106,800 of income could increase the solvency of the program for many years. Social Security funding needs tweaked. The program does not need to be overhauled.

And before proposing ideas that would essentially destroy the safety net, presidential candidates would do well to revisit exactly why Social Security was created in the first place. That history is particularly relevant today.

During the Great Depression, poverty was rampant. More than half of elderly Americans lacked money to cover basic needs such as food. The majority of states had some form of old-age pension programs, but only about 3 percent of older citizens in need received benefits, which averaged 65 cents a day.

Facing the worst economic crisis in U.S. history, the public demanded help. President Franklin Roosevelt delivered it by signing the Social Security Act into law in 1935. It was historic.

The government established a program in which working Americans contributed to a system providing help for older Americans. Seventy-five years later, it helps not only retirees, but also their children who are not burdened to financially support them. It also provides income to disabled people and children who have lost a parent.

Such a program would likely never be created today. Now politicians campaign on promises to cut the programs that help the less fortunate.

But we should strive to be a country where those fortunate enough to work give a little back to help those who cannot. We should want to help provide a limited monthly income so our parents and grandparents don’t have to work until the day they die.

That is what we do when we pay Social Security payroll taxes. That is a good thing — not something to be demonized and dismantled.

Copyright The Des Moines Register. Reprinted with permission.

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John Schultz September 15, 2011 | 9:32 p.m.

"But we should strive to be a country where those fortunate enough to work give a little back to help those who cannot. We should want to help provide a limited monthly income so our parents and grandparents don’t have to work until the day they die."

And Americans do that in abundance every day, voluntarily. That's not the same as forcing people to fund another person's retirement, something that everyone should do on their own and would realize a far larger monthly check than with Social Security. Oh yeah, and you could leave money to your descendants as well.

(Report Comment)
Paul Allaire September 16, 2011 | 11:56 a.m.

So what if your great retirement plan includes the next Enron or a bank that has yet to fail? And what if you don't have a family to speak of? And what if you face a catastrophic illness that wipes out your entire retirement? I realize that all this will be lost on you, so I will now quit trying...

(Report Comment)
John Schultz September 16, 2011 | 4:54 p.m.

No, it's not all lost on me. I just think that forcing people to provide for retirement for someone who has retired, instead of letting them save for themselves, makes people dependent on the system and/or think they will be able to comfortably retire on Social Security instead of buying bargain brand cat food.

I would welcome your comments on this letter I sent it last year and why I think it's best to move younger people off Social Security and let those billions in the trust fund (oops...) pay for those who have retired or are nearing retirement.

(Report Comment)
Paul Allaire September 19, 2011 | 7:36 p.m.

I read it. So, um... what about the people who's investment managers advise them to have their money in the next Enron? Oh, wait. I already asked you that.

What of the people who exhaust their retirement savings on account of a family member who's illness exceeds the cost of their insurance? What of the people who find themselves needing to dip in on account of the legal problems of a family member? What of the people who are not able to save because their spouse dies or gets a better idea, leaving them as the sole provider for their family?
This is aside from what I believe would be a large percentage of people who will not plan for their retirement at all, at least not when they are young. As long as eliminating social security is a part of the libertarian platform the party has not a bat's chance in hell of doing anything.

(Report Comment)
John Schultz September 20, 2011 | 1:13 a.m.

Most people shouldn't be investing in individual stocks. Too risky and puts all your eggs in one basket.

As for your other scenarios, it sounds like cases of life happening. If a relative needs money for healthcare, it might be better to mortgage a house for the money and work longer than not having any money for retirement. Most insurance plans have a cap on out of pocket expenses except for all but the most serious of health issues.

If you need to dip into retirement savings to cover the hypothetical family member needing legal help, good luck trying that with Social Security.

As for the death of a spouse, the best thing to do there is to prepare for that event with life insurance and hope it isn't needed. I pay a little over $50 a month to make sure my kids are taken care of in case anything happens to me. By the time the term life is up, they'll hopefully be out of college and making their own way in the world and I won't need it any longer.

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