They say (who are 'they' anyway? And why are they always sayin' things …) Social Security and Medicare are the 'third rail' of American politics. If any politician grabs hold of them, they die.
Watch this. I'm putting one hand on Social Security, and the other hand on Medicare. Now I'm lifting up the rail (wow – this is heavy), and I'm biting it.
Gee – I don't feel dead. In fact I feel energized. Maybe I'm the Energizer bunny …
Folks – its math. It's not politics at all, it's not emotions, it's not my 95 year old mother standing in the kitchen with a carving knife ready to use it if I mess with her social security check.
It's … math.
There are three groups of people involved. Two groups are under 65, one group is 65 or older. Of the two groups under 65, one of them is working and the other is not. The working group pays into the system. Simultaneously every member of the over 65 group draws out from the system.
In the long term, money paid into the system has to equal money drawn out of the system.
Under 'Social Security now' (the thing some people claim to want to 'save,' the law as it is currently written), the money that will be coming in will simply not cover the money that has to go out. Ever. Too many people over 65, too few working folk under 65.
So, we have three choices. I am actually going to allow you to vote on which one of them you prefer. And that is the one I will vote for when I am in the Senate. But first they need a wee bit o' explanation. And please remember ... your vote will never change the math (otherwise I'd vote that the $2 in my shirt pocket plus the $1 in my jeans pocket to equal $100 so I can have a nice steak dinner and a few drinks with my friends tonight).
Choice One – Whistle bravely in the dark. Don't change a thing. Some people keep on paying in, some people keep on cashing their checks, everybody pretends the future will never be here. This is the choice our current crop of politicians is making. This is the choice many Americans are making. It is a bit like climate change – if I pretend it isn't happening, it will never happen. It's a good way to boil frogs (I believe that story is apocryphal, by the way, but when has that ever stopped a good story?).
Please, if this is your choice, consider one thing before you actually vote it up. The people in the top half of the income distribution – the 50% - will not be hurt by this. I will not be hurt by this. And you will probably not be hurt by this, since the mere fact you are reading my rant suggests you are in that top half, or could be if you wanted to be.
The other 50% will not be so fortunate. The people I care about, which frankly is this 50% and not your (my) 50%, will not survive so nicely. When their Social Security checks bounce their rent won't get paid (when ours bounce we'll have something to laugh/groan about at dinner parties with our friends). There will be a lot of suffering. A lot of misery. A lot of pain.
If you care only about yourself and the top 50%'ers you associate with, I am understanding. But I hope you care a wee tad more for the bottom half, as do I. I hope you will vote against this option.
Choice Two – 'fix' the system.
There are an infinite number of ways to change the system to make it self-sustaining. Remember those two groups (everyone under 65 who works, and everyone over 65)? It's pretty simple. Everyone under 65 will have to pay more, or everyone over 65 will have to get paid less, or some combination of the two. Bingo – end of problem.
Except … they'll have to pay a LOT more, or get paid a LOT less. So much, in fact, it is probably politically impossible to make it happen. Do you really think, for example, young people will be willing to hand over, let us say, 36% of their paycheck (they currently hand over roughly 12.4% of it – the exact math gets tricky but 12.4% is close enough for government work)? Do you really think people over 65 are willing to take a 67% cut in their checks?
I am not pretending I know those numbers to be correct. I just threw them out there because it is important to have a sense of the size of the problem, not necessarily a precise measurement. Other people can produce the exact numbers far easier than I can, and we should let them. Right now we just want to talk in vague generalities. Really. Because we want an overview of the problem, and the possible solutions, before we get down and dirty with the details.
As opposed to most politicians I am going to propose to you right now my favored fix. In excruciating detail. Best sit down with a cold beverage and an appropriate baked good.
My fix is fair. My fix is permanent. My fix is easy to understand. And my fix can be implemented instantaneously. Right now. Problem gone. Forever.
Notice I did not say 'with no pain to anyone.'
My fix says – if you are already 'in' the system, in other words you are receiving a social security check, then absolutely nothing changes for you. You lucky … lucky … lucky … somethings. Congratulations on making it onto the ship just before they pulled up the gangplank.
When I say 'nothing changes' I pretty much mean 'nothing changes.' OK, there may be a small tidbit of tinkering at the edges – that cost of living adjustment has to be done correctly, which will probably make it a mite smaller – but on an individual level you can more or less count on getting exactly what you have been promised.
Note to all you lucky somethings – I don't want to hear you complaining. Not one bit. You promised that your children and your grandchildren would support you in your old age. They are going to do so. That was an outrageous promise when you made it and it still is. But, rather than blame you for it I'm going to blame the stinking lying politicians who bought your votes by claiming it could be done. Yes I'd like to track them down and water board them until they spouted water like Moby Dick. Or perhaps strip them to their britches and put them up in stocks around the country for public ridicule by honest civilians. It ain't gonna' happen. We just need to remember this – never let them do it again! Never!
The only question remaining – where do we get the cash for all them checks?
Hold your breath cuz we're going on a steep ride.
Starting off – I'm not going to raise the Social Security tax rate one damn bit. Leave it where it is – we're all used to it.
Here comes the bump. We implement a five year plan to go to a 100% pay as you go system. Maybe a seven year plan. Now those of you who follow this type of thing might say hold your horses we have a pay as you go system. That's what Social Security has always been. Not exactly. What it's mostly been is a spend it all as you go system. Take the extra that was paid in from about 1985 through 2008 and spend it like a continent full of drunken sailers. Who cares about tomorrow's hangover?
You can find a handy graph of how much more or less was paid in than was paid out in this paper. Check out the flip from 2008 to 2010 - $112 billion in the wrong direction. Ouch!
One of the biggest lies those stinkin' politicians told you was that the extra money went into a 'Social Security trust fund.' Yeah right. You are a serious sucker if you ever believed that. One, two, three THERE IS NO SOCIAL SECURITY TRUST FUND. All there is, is a piece of paper somewhere in Washington, that somebody wrote 'Social Security trust fund' on. In pencil. And left it on their desk when they went back to the deep dark hole from whence they came, carrying a bunch of your money with them on the return trip.
What I mean by a 100% pay as you go system is one that actually collects every year exactly as much as it pays out every year. Got that every year part, or do I need it say it again? The system balances every year.
This is not done by printing more money. Or by cutting benefits. Or by raising taxes. It is done by having a flexible retirement age. That's the big idea there, so hang on to it. A flexible retirement age.
Not 62 1/2, not 65, not 70. Not any other number, either, but a flexible retirement age that automatically adjusts the money coming in to the money going out. Something a first year accounting student could calculate, though we might not let her do it the first time around. If there is any actuary in America that cannot perform this calculation, let's set 'em in the corner wearing the tall pointy hat.
You see while we love people as individuals, we can think of them as just numbers. Sorry to put you off like that, but I told you it was a math problem. A number problem. The cone heads in the social security accounting offices can actually predict, with an astounding degree of accuracy, all the numbers we need to know. They can clickety clack their calculators and tell us how many people can be in group one (receiving a check) based on how many people are in group two (paying social security taxes). For the next 100 years or so. Maybe 1,000 years. And they can tell us almost exactly how old we will have to be before we can move from group two (working stiffs) to group one (rowing skiffs), to keep the system in perfect 100% pay as you go mode.
The chart will be pretty simple. It will say something profound like – if you were born in August 1951 (I was) you are predicted to be able to retire and start eating at the public trough in January 2025. Look it up, put it in on your calendar, go back to work.
Of course these dudes can't predict things like … recessions. So, to pick a random example out of thin air, they wouldn't have seen 2008 coming. Because of this someone who was previously told s/he could hang up the overalls in July 2009 might wake up one morning and discover s/he wasn't going to get that first Social Security check until a few years down the line. Bummer! Unfair! Unjust!
Yea, well, you're right and I personally am not happy with that. But I'm also not so thrilled for the people who woke up one morning and discovered their 401(k) had just tanked (talkin' bout myself here … ). And I'm not so tickled about the people who woke up on the same morning and were given a pink slip. Whose small business went into the crapper. Whose line of credit was terminated (can't stop talkin' bout me). Whose long term contract was canceled. Who had to switch from bacon and eggs to spam and dry toast.
There were a lot of people who suffered from that 2008 bump in the road, and there will be a lot of people who suffer from the next one (don't think there won't be one – nobody has the slightest idea how to avoid them, and if they say they do, they're either dumb as a stump, or lying).
Having to wait longer than you expected to make it into the 'I cash checks' crowd is not the end of the world. We'll all live through it. And, because we do, the social security system will be permanently sustainable. Until the sun burns out and we don't need it any more.
Here's the politically incorrect executive summary. Before you can retire, somebody who has already retired has to die. Be careful what you wish for.
[A reasonable alternative - we need 8 new immigrants, working legally and paying taxes.]
It's a real plan. It's fair. It's just. It's permanent. It's not a bad idea, and I've given you enough details to chew on for a while. Think about it.
But hold your horses – don't be doing any voting, not just yet.
There is, in fact, a lot to be said against this plan. Which is why I'm offering one more choice, explained below. Please read it carefully before you vote. Or don't vote. Ignorance may be bliss, but please don't inflict it on the rest of us.
Choice Three – wind it down and throw it out. Replace it with something better. Treat people like adults.
I have talked about this choice to hundreds of people. By the time I get elected to the U.S. Senate in November that might be thousands.
Most people's eyes glaze over.
Maybe it's my bad jokes? Too much math? Not quite enough personal space between me ranting and them retreating? There's another possibility. Could just be a bad idea. It won't be the first and it won't be the last of mine. But I've thought about it a lot, and I kind of like it.
There are huge and, frankly, disgusting problems with our current Social Security system and my suggested fix. I bring the finances into balance, but the core is still rotten. Let's drill it out and clean it up. Root canal kind a thing.
1) It is a completely unjustified direct transfer of wealth from young people to old.
Now to whom does that make sense? Why should a young minority man in NYCity go to work at his first job at McDonald's and be forced to hand over 12.4% of his check directly to my 95 year old mother, who just paid $5,000 in cash to remodel her bathroom? Huh? Does that sound fair?
Every old person in America deserves to be supported by every young person?
The date on your driver's license determines whether or not you pay, or get paid?
Frankly I'm astonished anybody in America ever approved of such a system. It is blatantly unfair to young people – who cannot see that?
2) Dying early reduces your benefits to zero. Zilch. Squat. Nada. Take my brother-in-law as one example. He died quickly, of previously unknown heart problems, at the age of 53. By then his two children were grown and gone and all the life insurance was canceled. He had paid social security taxes from the day he first started working right through until the day he died. The sum total of all social security benefits received by anyone, ever? $250 death benefit.
With social security, when you're dead you're gone.
Staying alive allows you to suck from the system indefinitely, so it's a pretty good strategy. Would you like to know who is very good at this? White ladies. There, I said it. All you blue hairs can start campaigning against me. And you won't have any trouble recruiting my mother to throw the first stone.
But that's the simple truth – everybody pays in, from let's say when you start working at age 21 until you retire at age 65 (if you live that long). But you have to be alive to collect, and white women in America live longer than anyone else. So they collect the most, even though they didn't pay in any extra.
This makes the system highly prejudicial against, ahem, men (that'd be me). And against blacks (that would not). And against the unhealthy (I'm doing my best, but genes are a terrible taskmaster). You know – let's take all the money from unhealthy black men and give it to my mom and her friends.
Really? America is proud of a system that aggressively transfers money from black guys to white gals? I'm not. I'm appalled. I think that is absolutely despicable social policy. I think it exacerbates other racial problems this country has, and I do not approve.
And just one more whine before I move on. College educated people live longer than those who aren't. By about 11.5 years. So the working stiff funds the educated elite's retirement ... just what the doctor ordered, right?
3) The current system treats us all like children. We are too immature to save our own money, so daddy will save it for us.
Guess what daddy! I don't need your help! I can save my own money, thank you very much.
Who ever convinced this country we were a bunch of irresponsible infants with no hope of maturing into adults that know how to save their money? You talk about a Communist plot … what else could it have been?
I am more than willing to admit there are a few people who can't save money. I happen to know a few of them myself, actually. But does this mean the entire country must be forced to save their money through a government mandated social security program? Because of a relatively few miscreants? We all pay, so they can't play?
My proposal is this. Wind down the current system. Everybody 50 and over can get in, but at reduced benefit levels depending on your age. Current recipients keep getting what they get now. Current workers keep paying what they pay now, but as recipient numbers shrink those taxes go down as well.
In its place – we all save our own money, in our own way, at our own rate, according to our savings preferences. No more government checks. End of story.
Except it isn't. There will be some spendthrifts who show up at our doorsteps begging for handouts. We'll feel sorry for them. We'll write them a check. They'll go away and tell their friends, who will quit saving their own money, knowing they'll be covered by the rest of us.
My answer is simple. It springs from my semi-autistic tendencies. Let them beg, just don't give them a government check. If one of them happens to be my mother, I'll take care of her. If it is someone I know who really did run into a streak of bad luck I'll probably write an anonymous check. That's exactly how America functioned from 1776 through 1935. Things worked very well, and the streets weren't filled with impoverished old ladies begging for a crust.
The myth that Social Security somehow or another made America a better place to live is sheer nonsense. It just took a bunch of money away from young people and gave it to old people. Congratulations on doing nothing particularly worthwhile, while vigorously patting yourself on the back. Socialist dogs … ;-).
But, since we already know (if we think of people as numbers, not people) some people will manage to foolishly spend all their money and then appear begging on our doorsteps, and begging is so … so … so off putting to our middle class sensibilities (my advice – travel more – most countries are far more accommodating of beggars than America is), we want to avoid that unpleasant possibility.
So I am offering a Plan 3a and a plan 3b.
Plan 3a just lets you do what you want with your money. There is no plan.
Plan 3b forces everyone to save their money. In their own account, but no option to slack. Young wo/man you shall save! Washington says so! Do not question authority!
Let's just say the current tax rate continues. You will have to put 12.4% of your pay directly into your retirement account, and you won't be able to touch it until you are old enough to do so responsibly. Let's say … 65 … when daddy finally turns your trust fund over to you.
Lucky dog. Now you can go wild.
Oh no – not that! You irresponsible dolt.
You should only be able to buy an annuity, so you can never run out of money, no matter how profligate you are. Do you know what an annuity is? It's a promise to pay you a certain amount every month until you die. Just like … Social Security, except there will actually be money in your trust fund to pay for it so you won't have to rip off young minority kids before you can cash your check. The bad news – just like Social Security, when you die it's gone. Nothing left over for the next generation, or for NPR, or for whoever you wanted to benefit from your lifetime of work and saving. Maybe your cats? They will go hungry ...
Or we could just let you take responsibility for your own life. After all – you're 65 years old. Isn't that old enough? Or do we need a plan 3b(2)? I hope not.
There you go – Rick's three choices for you to ponder. I got pretty tired writing this up, so I didn't do a good job of selling Choice 3a. Hopefully you can tell it's my clear favorite, for obvious reasons.
But now it's your turn. Think about the choices. Talk to your family and your friends. Then make up your mind and vote - here. [IMPORTANT NOTE - you must have an account, and be signed in, in order to vote.] I'll support the plan you like the most, as demonstrated by your votes. I'm not here to terrorize you or preach to you or to try to buy your vote with a bunch of blatantly false promises. I'm here to give you information you can digest, and tell you why I think the way I do. Now it's my turn to listen.