Social Security: A Booming Implosion

Given the nation's first baby boomer, a retired teacher from New Jersey, applied for Social Security benefits Monday, so begins a booming implosion. Without question, the time has long since passed for Social Security’s solvency to be addressed.

Social Security (not to mention Medicare) is badly broken, and is estimated to bankrupt this country in ten years. Public pension plans (for example Minneapolis Teachers Fund) are constantly under scrutiny. And why? Because of the unfunded liabilities for which taxpayers are on the hook. So then, what about the world’s largest pension plan Social Security? Although it was never intended to be the sole support for retirement, because of Democratic promises, and Republican complicity, it is now to the point where most vocal complaints stem from people who state they can’t live on social security alone (Ya don't say..).

So therefore, the unfunded liability which befalls it needs to be addressed, and steps taken to diminish the continued demise. Because the estimated unfunded liability is somewhere in the double digit trillions of dollars, it will not be eliminated overnight. But, it should be reflected in the balance sheet of the government. This is the only way to highlight the problem to everyone’s understanding. Then, when proposals are made to change the benefit schedules, the impact will be readily apparent. The safe harbor of not affecting the benefits currently being received by those already retired, and possibly those within 5 years of retirement, or some other safe harbor period, should negate any attempt to rally the affected folks against the exploration of a solution. That is if the exploration seriously begins soon, otherwise, there will be no safe harbor to offer. The system will just collapse or implode.

One of the other difficulties deals with the sheer magnitude of the balance in the trust fund (you know the one where Congress borrowed to spend on other things). Simply redeeming those notes would put a significant strain on the budget of the United States; a strain set to begin in just a few short years. Will the working people of this nation stand for the levels of taxation that will be required to fund that redemption? Though they may, and it appears in largess, have taken a liking towards increased levels of taxation. With respect to this exorbitant shortfall, I don’t believe they will.

So what solution am I proposing? Well, first and foremost we ought to index social security benefits to the CPI (consumer price index) and inflation rather than wages; a move echoed by Fred Thompson in last week’s MSNBC debate. That single move alone would free up money so that we could start moving towards partial privatization (something I’m a huge proponent of). But that would require a compromise from the AARP crowd. Next, redeem the non-negotiable notes held by the trust fund with negotiable Treasury Bonds. This would permit the Social Security Trustees to sell the bonds in the market and retrieve at least some of the cash needed to meet its existing obligations over the next decade. Granted, the strain on the market would be significant as the values of the bonds fluctuate as the market perceives the ability of the government to redeem its debt. Of course, the biggest challenge lies with Congress having to eliminate its luxury spending and philanthropy, which was never within its powers delegated by the People and the States in the Constitution to begin with, just to pay the interest on the debt. But, bare in mind that ceasing such philanthropy which includes Social Security and Welfare is better than sustaining a promise made by a Government that has mislead subsequent generations into believing that the obligation was genuine, legal and one they would meet. The unfortunate reality is that there is no legal obligation on the part of the Government it is just like a charity contribution, one which is not guaranteed to continue year after year. It isn’t insurance that you’ve paid premiums for the benefits over the years but rather just another ponzi scheme and a re-distribution of wealth; taking from some and giving to others. The government has fostered a belief that we have a right to quit working, and then be paid by the government. And not, mind you, as merely a supplement to one’s savings as it was set out to be but rather a payment which maintains one’s standard of living in perpetuity. There exists no such right.

Despite his good intentions, the President was unable to get Congress to act on it. But, Congress needs to come to terms with this. Conservatives have a great opportunity to not only propose serious recommendations to address this problem, they also should be working aggressively towards that goal. We must be proactive and diligent in this pursuit before 80 million more boomers lead us towards economic implosion.