Social security: how the Dems will cost you $3 million Dick McDonald BrookesNews.Com Monday 14 February 2005 If you are under 55 years of age and don’t read and understand this essay you will only have yourself to blame for not acting now and saving yourself and your family $3 million if you have 40 years of your working life in front of you. If you have less time left, your failure to act will cost you proportionally less. For those 25 years old or younger, you need to start now to protest to your Congressmen, Senators, your political party and the President to completely reform Social Security, Not some half-baked compromise reform President George W. Bush is pushed into because the present system is the creation of the Democrat Party and they and the MSM will fight tooth and nail to retain the old system. A $3 Million Loss President Bush has let it slip out that he is thinking of backing a change in the Social Security system that will allow taxpayers to direct 4% of the 12.4% of the payroll taxes withheld during any year and place it in a personal account which is owned by the taxpayer. But to assuage his opponents he has capped the amount that can be allocated to the new system to $1,000 the first year rising each year by $100 until 4% is reached. I have made computations for an individual who during his forty years of work makes an average of $40,000 per year. Of the 12.4% of his wages paid as Social Security taxes to the Government during his 40 years in the amount of $203,360 only $63,500 will be allowed to be allocated to the individual’s personal account under Bush’s accommodation. Assuming a generous 6% return on investment of that $63,500 over forty years amounts to $181,529 enabling the taxpayer to have a $245,020 nest egg at 65 to buy an annuity or to pass to his heirs should he die. The $245,020 would pay for an annuity for the remaining 22 years of the average life at a 6% return $1,600 per month. When combined with the Social Security check of $1,000 would generate a $2,600 monthly retirement benefit. To bring a little realism to the issue let’s assume the taxpayer is an uneducated dock worker at LA Long Beach Harbor and makes $120,000 a year and that his wife works as an administrative assistant who makes $60,000 a year. As the individual cap on earnings is $90,000 per person per year then only $150,000 ($90,000 and $60,000) is subject to Social Security taxes. Over 40 years, the couple will have $762,600 of payroll taxes withheld or paid on their behalf by their employer. If self-employed the entire $762,600 will come out of their own pocket. Let’s assume for arguments sake that the people convince the politicians to “privatize” the entire 12.4% of the payroll taxes paid to the government. That the $762,600 earns an average of 6% per year which compounds to $2,491,480, which results in a combined $3,254,080 nest egg at 65. Ergo a $3 Million gift to the government if the Democrats are successful in keeping Social Security a “government” program. A $3 Million privately owned asset for the taxpayer if Bush can be convinced to take the high road and privatizes the entire program. If a 22 year annuity is purchased it would pay $21,245 per month. Solvency and the “Crisis” Can we privatize the entire program for those under 55? Probably not. Some sort of split program would have to be structured for a smooth transition for those heavily vested in the old system. However, don’t fall for the nonsense that Social Security isn’t in a crisis. There is no fund except a negative fund represented by the $1.7 Trillion confiscated from the “fund” by Congress to pay other bills. Presently 3.3 workers support one retiree Congress’s pay-as-you-go plan. Shortly only 2.1 will support one retiree. T The Democrat solution to all such problems is to raise taxes and cut benefits. The real crisis facing the country is the Democrats’ lame, self-serving solution of a bigger government involvement in private affairs. The nonsense that we will run out of money in 2018 and go bankrupt in 2042 is pure rubbish. There is no fund. Just promises built on the back of current workers. Social Security is insolvent. It would take $12 Trillion in the bank to currently fund the promised payments to retirees under the current system. The Social Security “fund” the Democrats refer to is nothing more than a bookkeeping fiction to cover their theft. A $1.7 trillion asset (the “fund”) offset by $1.7 trillion of the national debt they've created. To be “insolvent” means to have been solvent at some time. Now there is no solvency because there hasn't been any since they looted the fund back in the 1960s. If my $3 Million example proves nothing else, it proves that we could significantly lower payroll tax rates if we privatized Social Security. Cutting Social Security Payroll Taxes would encourage business to hire more workers and stimulate the economy. It is an idea that is coming fast. Our Founding Fathers never conceived of a “welfare state”. That was the pure knee-jerk reaction to our own inability to manage business cycles. In pure force, the Great Depression was not solved by the nanny state it created. After 11 years unemployment hovered around 17%. A combination of factors in early 2001 could have been as devastating as the Great Depression. But unlike the FDR regime, free trade was untouched and taxes were immediately cut along with interest rates to cut short the “recession”. It lasted only four months. That recovery was greatly assisted by the Social Security system which fueled a constant consumption that wasn't there in the thirties. But the fact remains the $900 a month stipend doesn't even pay the rent for a one-bedroom apartment in Los Angeles. We need to reform Social Security to make the amount fair and just. Democrats are refusing to do it.