Saving Social Security

If anyone doubts the seriousness of Social Security finances, let them suggest to public employees that their private pension plans be incorporated with the giant federal system.  

The screaming objections of teachers, police, fireman and court house workers should make the rest of us uneasy about the government pension plan we have to rely on.  

Congressman Richard Bolling, a Missouri Democrat, proposed during recent budget negotiations that the financially sound public employee pension funds be forced to join Social Security.  This would bring an additional $10 billion yearly with which to bail out temporarily the nearly bankrupt federal trust fund.  

Bolling backed off under fire, but something must be done very soon or the principal prop of our social "safety net" simply will collapse.  This possibility is so fraught with taxpayer revolt that Congress is casting about frantically for a quick fix.  

Give up, guys!  Aladdin's lamp never was.

The inescapable fact is that there is not enough dollars in the entire U.S. economy to give us all the welfare we have been promised.  And welfare is just what Social Security today has become.  

While Congress must give up the fruitless search for a free lunch, we must give up on the notion that Social Security is some kind of insurance policy that pays back what we put into it plus earned interest.  

In the beginning, it was that.  The plan was meant to supplement - not supplant - our own provisions for old age.  Money contributed by employees and their employers were invested in U.S. Treasury bonds.  The earnings were to be paid back in accordance with what was paid in.  It was called Social Security Insurance.  

After World War II, in a burst of social compassion, benefits were increased and parceled out to workers who had never contributed.  Nevertheless, rapid growth of the economy and a high proportion of young workers built up a huge pot of money.  

President Harry Truman and his solid Democrat Congress couldn't resist the opportunity to tap the glittering pile of Social Security gold.  With hardly a ripple of dissent, Congress confiscated the Social Security Insurance fund to balance the budget - one of the few times this has occurred since before the Great Depression.  

The argument for doing this was cute, "Why not, we only owe this money to ourselves."  

It is this kind of upside down rationalization that brought Social Security to its present sorry state.  One can understand why government employees will have none of it.  Their pension plans are safe and considerably more generous.  

State and local retirement funds require contributions by the employee and his agency of 8.5 percent each - large enough to do the job.  Social Security contributions have ranged from 0.5 percent each when the law was passed in 1935, to 6.7 percent each in January of this year.  In pension plans, as in everything else, you get what you pay for.  

Federal government employees resist Social Security for good reason.  Their retirement benefits are a higher proportion of work earnings than those of private sector plans.  They can also retire and start getting those benefits at an earlier age - and without any reduction in benefits if they earn substantial sums at other work.  

The privilege given federal employees, including Congress and the military, of retiring at age 55 without restrictions is one of the rip offs that has hurt Social Security.  The arrangement permits "double dipping" whereby a federal government employee can "retire" early with a hefty pension, then work ten years in the private sector to quality for another Social Security pension.  In many instances the combined pensions are greater than the total working salary.  

Congress demands that private pension plans figure their costs on the soundest possible actuarial basis.  Any projected deficits must be made in a relatively few years.  Yet, Congress repeatedly ducks the same requirement for Social Security.  

Social Security is in trouble because it was turned into a welfare program which grants benefits on the basis of perceived need rather than a fair return on invested contributions.  Efforts to save Social Security from disaster are fought most strenuously by those who have put the least into it.  Should their lobbying prevent long-needed reform, there could be nothing left for them or anyone else.  

Conservatives recommend a mandatory pension plan but would leave the collection and distribution of funds in the hands of private insurance companies chosen by individual taxpayers.  The government would continue to provide "old age assistance" to the needy.  

This would return more retirement money to the working contributors and yet provide for the non-worker as Congress feels appropriate.  In addition, private-sector funding would place enormous amounts of capital in the hands of insurance companies.  Presumably a large part of this capital would be invested in job-producing industry.  

The weakness of this argument is that Congress habitually over-spends and has to go into the investment market to borrow money.  Lamentably the Federal Reserve Bank always puts the U.S. Treasury Department at the head of the credit line to siphon off large chunks of investment capital at high interest rates.  

The liberal "solution" to Social Security's short-fall is support from general tax revenues.  But, there is no money in the general fund inasmuch as it, too, operates continuously in the red.  

The best way to reform Social Security would seem to be a return to its original plan of an actual accumulation of ready cash with benefits geared strictly to the level of contributions.  Most importantly the program should be managed by a non-political board similar to the Federal Reserve.

What even the solution, robbing the public employee's retirement programs is not it.  Rather, Social Security should be copying their system.

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