The Social Security Administration, headquartered in Baltimore , Maryland , is a highly efficient insurance company. Its efficient because it operates on less than one percent of its annual budget, maintains offices in almost every sizable city in the country, and has always paid benefits precisely on time. And it pays those benefits from the premiums it collects from new members and the continuous payments of members who have not yet retired or been disabled, the same thing any successful insurance company does.
Of course, what makes this particular insurance company different from all others is the fact that participation is forced by the government through payroll taxes. There are no sales or any form of competition involved. Every American worker has a Social Security number and every employer is forced to participate and contribute.
As an insurance company, Social Security has only two major faults:
1) Its operated by the not-for-profit federal government, an entity that is not supposed to be engaged in private enterprise.
2) It has usually produced a profit that the government takes (steals) and spends elsewhere. Since 1983, these profits have been continuous and have grown to be enormous reaching a high of $98.7 billion in fiscal 2001 and $71 billion in fiscal 2004 despite a troubled economy.
There are some who would like to take Social Security entirely out of the hands of the federal government and turn it all over to people in the private sector while continuing to enforce participation. The costs and the mechanics of doing this are enormous, estimated in the trillions, but their argument is that in the hands of the government Social Security is a form of socialism, which it is, and depends on the good will of politicians to continue, which is not true. After more than 65 years of operation as insurance, Social Security is the greatest implied contract that ever existed.
The simplest, easiest, and most immediate solution is to take the profit away from the government and turn those profits over to the private sector. Privatize the profits by taking them away from the federal not-for-profit organization that shouldnt have them in the first place. Leave everything else in place.
There are two ways to do this.
The first option would be to cut payroll taxes back to break even. Reduce these taxes by at least 14 percent. This would put immediate cash in the pockets of America's workers and employers as soon as their next paychecks and would not affect benefits at all. In the event of a shortfall, we wouldnt be in any position different than we are in now.
The second option is to set up a real trust fund in the private sector. A trust where the monthly surpluses Social Security generates are immediately turned over to the trustees of this fund who are not above the law and can be watched and prosecuted if necessary.
We already know that we cant trust the federal government with the profits. The government itself has already proven that (See: Social Security I). Even if the privatized profits do nothing more than sit in some bank drawing simple interest, the workers and taxpayers of this country will be more than one hundred percent better off than we are today facing a system of double taxation through phony trust funds.
Naturally, such a privatized trust fund would need the stipulation that these funds cannot be invested in U.S. Treasury securities that can only be redeemed by the same people who have created the assets of this trust.
And what does it cost to set up a real trust fund? A few hundred dollars, maybe as much as a thousand or so? Nothing like the bogus reform plans being proposed today.
Too simple a solution
Social Security has become much too great a slush fund for the government to give it up easily. With congressional committees like the Senate and House Budget Committees, Appropriations Committees, Finance Committees, Tax Committees, and others, plus the Congressional Budget Office (CBO), the Government Accountability Office (GAO), the Office of Management and Budgets (OMB), all devoted to anticipating how much can be expected in off budget revenue, the idea of cutting payroll taxes comes up only as a threat to the opposition party across the aisle who may be proposing tax cuts for the rich and famous. Its never a serious threat.
Even within the series of checks and balances our forefathers set up, no bill has ever been introduced to reduce payroll taxes. And if it were, it would simply die on the vine amidst hundreds of hours of debate similar to the lock-box legislation that took place when real trust funds are, by their very nature, already lock-boxes. The same can be said for promises not to touch Social Security money.
In fact, the entire idea of Social Security reform is nothing more than a weak attempt by the Beltway Bandits to cleanse their consciences of the guilt they feel for stealing the profits and expecting the taxpaying public to cover their loses by paying the same taxes again plus interest.
Worst of all, if they ever did legislate true reform, which is only a matter of not stealing the profits/overpayments, it would lead to the fact that they do exactly the same thing with other entitlements such as their own Federal Employees Retirement System (FERS), Military Retirement, veterans benefits, gas taxes, unemployment taxes, and more than twenty entitlements and trust funds that they manage.
goes far beyond Social Security which is merely the largest entitlement
they plunder. It dwarfs anything done by crooks in the private sector
and if truly understood by the taxpaying public could lead to revolt and
the absolute loss of power currently in the hands of elected politicians
and appointed bureaucrats.