Moral bankruptcy begins with the acceptance of lies, especially lies made by and to oneself. This process proceeds among those with extreme political philosophies, and it is a sad day for America, which needs political balance for a healthy society. A forum for examining this idea is a debate about social security reform with irresponsible, demagogic rhetoric spoken by those who know better but harbor unknown reasons for telling lies. What motivates Nancy Pelosi, Harry Reid and AARP (which has received $1 billion in federal funds) are secondary to addressing the problem of fixing what is so obviously broken.

Twelve years hence, Social Security will have an $18 B deficit, mounting quickly to $200 B annually with a shortfall of $27 trillion over 75 years; the current SS unfunded liability is $10.5 T. Cutting benefits and/or raising tax does not solve the problem. The idea of "progressive price indexing" offered by the White House and grasped by left and right politicians succeeds only in higher tax with reduced benefits that occur sooner instead of later! Since 14 August 1935 when SS began and labor-income earners were coerced to pay Federal Insurance Contribution Act (FICA) that has been increased eighteen times, the national retirement system has been in failure mode because the "trust fund" is composed of federal bonds that are a liability and not an asset. So government lied to the public. There is no asset fund, FICA is not insurance, citizens must pay FICA tax, there is no guarantee of federal benefit payment, the taxpayer has no ownership of "contributions," and today 90% of all employees and self-employed are under the SS plan with 44 million receiving this form of welfare payment. This is quite important to individuals but in ways a greater concern to industry.

Today annual SS retirement cost exceeds $465 B or 10.84% of labor; in twenty years it will rise to 16.02% and in thirty years to 17.77%. But this same SS fund collects tax for Medicare and Medicaid in addition, which is projected by Congressional Budget Office to rise from today's 8.4% of GDP to 17% of GDP in 25 years. By 2030 industry can expect cost increases over three-fold for required share of taxation. National debt and deficit growing at such rates to fund ballooning liabilities will make industry non-competitive in a world disinclined to accept an increasingly unstable dollar, unstable because the multitudes do not accept the idea of forever-debt. Forget whether old people get SS welfare checks or the old and indigent cannot afford sickness. When U.S. industry is not viable, our society is not either. National economic death is on a two or three decade horizon unless this specific matter is addressed NOW.

The only feasible way to salvage the U.S. retirement and health care system is with some form of personal savings account (PSA), and this is a focus of debate. Ideas include:

  • (a) replace SS with a 100% PSA retirement as Chile operates (successfully)
  • (b) adopt a two-tiered system with a flat rate basic benefit supplemented by a PSA
  • (c) earmark a specific percentage of existing payroll withholdings to a PSA
  • (d) mandate added payroll withholdings for a PSA
  • (e) use federal budget surpluses to fund PSAs
  • (f) create a federal investment board to invest SS funds in stocks and bonds
  • (g) create a retirement only PSA that supplements existing SS.

Looking at this list says (e) and (f) do not survive the giggle test, (a) is a U.S. political non-starter, (d) is what we have now in modified form called 401-(k) or IRA accounts, is voluntary, but liberals want to make it mandatory as a tax, while (c) is what conservatives seek, and liberals and AARP claim is "a risky scheme," but will eventually win in some form. Look at (b) and (g); some form of (b) is feasible politically, alleviates devastation, and sets a new national course. Possibly (g) aids reaching goals but, I cannot endorse it any more than you until we examine details.

A favorite (g) choice is the Social Security KidSave Accounts Act (HR 1041) first proposed by former Democrat Senators Bob Kerrey and Patrick Moynihan and endorsed by conservative Republican Senators Rick Santorum and Charles Grassley, and Democrat John Breaux. Under KidSave, each U.S. newborn (only legals we presume) would get a $2,000 loan from Social Security Administration deposited to a PSA that could not be opened until that citizen-owner retires or dies. The account would be managed by a Thrift Savings Plan manager (same fellow who now manages existing federal employee PSAs), in one of three options now used for investments in government bonds, corporate bonds, or stock index funds. Parents and grandparents could contribute $500 tax-free money annually and when the owner reaches age thirty, the original money would be returned to SSA in five annual installments linked to inflation over the thirty-five year term of the loan.