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Monroe County Democrats on Social Security
The local Democratic Party has offered a resolution on Social Security. The resolution claims that "privatization or the same by any other name -- either partial or in full -- will undermine the financial foundations of Social Security and fatally dilute its purpose of providing a minimum guaranteed income in old age or disability."
The Dow Jones index has seen tremendous growth over the last ten years. (Growth that coincided with the election of a Republican Congress.) Money invested in low-risk funds will yield a nice return in comparison to Social Security.
I have seen a large chunk of my income diverted to Social Security over the last decade and a half that I have been in the workforce. In times when I have financially struggled, that money would have been very helpful. If I knew that the money confiscated from me was in an account somewhere with my name on it, that confiscation would be easier to accept. However, there is no account with my name on it. Indeed, the Social Security "trust fund" is a myth.
The local Democrats offer "incremental progressive reforms in payroll taxation" as a solution. In other words, a tax hike will help make the system more solvent. President Bush has wisely ruled out such "reforms". We have been down the tax hike road before, without fundamental reforms to the system itself. The American economy, finally recovering from a recession that President Bush inherited from President Clinton, cannot afford a tax hike at this time.
The problem with Social Security is that it is, by design, a pyramid scheme. The theory is that you have a few people at the top supported by a lot of people at the bottom. Increased life expectancy is making the ratio of people "contributing" to the system to people getting benefits closer and closer to 1:1.
Instead of rejecting privatization outright to score partisan political points, Monroe County Democrats should be open to reforms that would strengthen the system overall. A few reasonable Democrats in Congress will be the key to getting true reforms (rather than tax hikes) passed. Sadly, Monroe County Democrats have chosen the obstructionist route rather than make a positive contribution.
Update: April 16, 2005
More on Social Security
Greg Travis of the "Association of Monroe County Taxpayers" responded to my post criticizing local Democrats' position statement on Social Security. A sampling of his (and others') responses:
Over the past fifteen years, the Dow Jones index has grown by 6.3% annually. That's not tremendous growth.
As you can see by the chart to the right, the total value of the Dow has increased dramatically since the early 1990's. That is what I would call "tremendous growth". The growth period includes the "bubble" of the mid 1990's, which corrected itself with the recession that began at the end of President Clinton's term. The recession was deepened by September 11 and the aftermath of those attacks. However, it is still dramatically higher than it was fifteen years ago.
The market naturally experiences ups and downs. Overall, however, the trend of the market is to go up. Moderately safe investments over a period of several decades will result in a better return that Social Security.
While it certainly would have been nice to not have a chunk of my paycheck confiscated by the federal government, There have certainly been times where access to my money that confiscated for government redistribution of wealth would have benefited me. I never said, however, that I would have spent all of the money available to me. Most importantly, it is no one else's business what I do with the money that I have earned through my work, so long as I am not using it for criminal purposes.
The GOP is going to take the People's retirement and give it to the rich and their speculators.
No one is saying anything of the sort. Instead, individual retirement accounts would be directed toward the retirements of individual workers, not simply thrown into a big pot for government redistribution of wealth.
Greg wonders if we can name "any for-profit private American corporation that is not only guaranteed to run a profit for every single year from now until 2018 but that will be able to pay all of its expenses for the next four decades?"
Talk about comparing apples to watermelons. No for-profit corporation has the power to confiscate wealth under the penalty of imprisonment. The federal government, however, does have that power.
Raising taxes, as Monroe County Democrats have suggested, is not the solution. We are finally starting to come out of the recession that began during the Clinton Administration and was deepened by September 11. Taking money out of the economy now would be counterproductive. We have increased the system's solvency before by raising taxes. What we need to do now is address fundamental reforms in the way the system operates so that we will not need a tax increase.