Privatization Best Hope
for Social Security
by


This first appeared in the
North Hills News Record

If you and I were in charge of Social Security, we'd be busted for running the biggest Ponzi scheme in history. What started out as a nice simple supplemental retirement program that required a measly 2 percent of a person's wages, 1 percent paid by employee and 1 percent by employer, has ballooned to become our biggest and most sacred entitlement program.

But as the ratio of workers to retirees diminished, Congress has had to raise payroll taxes and cut benefits just to keep the racket afloat. This nice simple system now siphons off 15.3 percent of every dollar a person earns and it's still going bankrupt.

Once again Congress decided to get serious about the whole thing so they did what they always do when they're ready to tackle a tough issue. They formed a commission.

We've been treated to Social Security commission recommendations before. Heck, that's why the retirement age for the younger generations got bumped form 65 to 67 and our payroll taxes increased over 750 percent.

This time, however, the commission gave serious consideration to privatizing at least a portion of the system. It's about time because what's pathetic about this whole mess isn't the fact that Social Security is going bankrupt. The crime is that it's such a waste. In the real world, legitimate pension plans could never settle for the ridiculous returns that Social Security gets.

Picture a 26-year-old software engineer. Let's assume she's able to put half of her Social Security tax payments into some kind of a stock fund.

After about 2,000 such weekly investments she can retire at age 67. Investing like this gives her a monthly pension that is equivalent to $5,862 in 1995 dollars. The current Social Security "trust fund," which claimed the other half of her payroll tax, yields only $954 a month.

These particular numbers were compiled by William Shipman of State Street Global Advisors for the Cato Institute's Project on Social Security Privatization but anyone who has seriously investigated privatization comes up with the same results--Social Security is a rip-off.

Sure investing in the stock market is risky. But these numbers still leave a person ahead of the game, even with several massive stock-market "corrections." All the money that now gets shuffled from one generation to the next could be used to expand businesses to create more and better paying jobs.

Critics of privatization whine that these investment plans will hurt the elderly poor.

With Pennsylvania's growing elderly population, this is certainly something to be taken into consideration. But since the poor rely more heavily on Social Security benefits than their wealthy counterparts, they actually have the most to gain from privatization.

Social Security can't be privatized overnight. It will have to be phased in over a period of time. But we must be absolutely certain the government is completely removed from the equation. The last thing our elected officials need is another trillion dollars of spending money to fund their latest political pet projects.

There's no way to lose with privatization. Instead of being taxed, young workers can actually earn real savings. With more capital, businesses will be more competitive. And the elderly will have more money for retirement.

Privatization is the only way we'll ever put security back into the system.

© Copyright Deborah A. Ayers 1997. All rights reserved.