Monday, August 18, 2008

Democrats Thanked for Cheating Social Security

While perusing a Google inquiry that led some now-enlightened soul to my post on privatizing Social Security, I came across this website discussing whether the Social Security Trust Fund was worth anything.

I read the post by Angry Bear (slightly left of center economic commentary on news, politics, and the economy) and his readers’ comments, and soon felt I was witnessing the rearrangement of deck chairs on the Titanic. Their debate spent inordinate time and energy discussing the Special Treasury Bonds held in the Social Security Trust Fund that are issued when its surplus is transferred to the General Fund. Angry Bear and cubs felt these bonds were real, and could be negotiated on the bond market the same as any other Treasury Bond. Others disagreed, characterizing them as “play money.”

The cause of the historical diversion of the Social Security surplus occasioned a prolonged round of partisan finger pointing, although it is clearly the love child of LBJ and the Democrats as they sought a means to finance the Great Society, create Medicare, expand the Vietnam War, and do it all without raising taxes.

However, astute bond traders/investors/students of finance noted that the Special Social Security Trust Fund bonds are government bonds that can only be redeemed by our government issuing regular Treasury Bonds redeemable from the General Fund, which would require the General Fund to reduce expenditures and/or raise taxes to fund their redemption.

Hallelujah, they got it right! Of course Angry Bear and his cubs fought on, laying down smoke screens including a gratuitous offer to buy the doubters’ shares of Trust Fund bonds at 10 cents on the dollar.

Their silliness reminded me of my silliness twenty years ago, when I offered to relinquish any and all claims I had for all time against Social Security if they would only refund my and my employers’ total contributions to Social Security. I pledged if Social Security would do this, I would be responsible for me for the rest of my life.

Further, in terms of healthcare, all I asked was that I could stop paying into Medicare and only receive the lifetime medical coverage through the United States military medical system that I was promised upon retirement from the Air Force.

Social Security and Medicare never accepted my generous offer. Had they, I would have taken the $47,935, invested it in an S&P 500 index fund, and each month thereafter increased my investment in the fund by 12.4% (the FICA rate) of my income. At the end of this year I would have an account valued at over $500,000, based on the actual performance of the S&P 500 during the past twenty years.

I get under $2,000 per month from Social Security, so if I stopped investing the $500,000 and took out $2,000 a month, it would last over twenty years (my current life expectancy is fourteen more years, or to age 80). Of course I would keep it invested, and since the rate of return of the S&P 500 since January 1980 for all full-year increment holding periods is 13.9%, I could withdraw an average of $5,790 each month and never touch the principal. That’s almost triple what I’m getting from Social Security, and I would still have half a million dollars for special needs or to ease us through hard times.

Unlike under Social Security, if I died young – like right now at age 66, which is the life expectancy for Black American males – I would still have $500,000 to pass on to Alice and my sons, grandchildren, and great-grandchild.

Mentioning Alice reminds me that if she could have opted out of Social Security only twenty years ago, she would now have an S&P 500 index fund valued at over $600,000, and our combined annual income from our privatized equivalent of Social Security would be over $150,000 without pulling a penny from our total principal of over $1.1 million.

There is an obvious bottom line here, and I’ll spell it out. Like John McCain said, Social Security is an absolute disgrace.

I’ll spell out another obvious conclusion. If Democrats had not demagogued reforming Social Security, our senior citizens would not have shot down their own chances for luxurious retirements by fanatically defending the present abomination.

Not only is it an absolute disgrace, but it is a political football and cash cow for Democrat politicians. They shamelessly pander saving Social Security to gain senior votes, while even more shamelessly diverting the surplus to pander to special interest groups and buy their votes.

In the end it’s poetic justice: Democrats cheat the old of incomes and estates they could have had, and are thanked for doing it, then spend the Social Security surplus to buy the votes of younger Americans so they can be cheated of their futures too, while profusely thanking their cheaters.

I just wish I didn't have to be an unwilling participant in their stupidity.

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