Russel Chase (R)
The Social Security System, started in 1935 primarily as a survivorship fund outgrew its original intent within 20 years. Around 1955 it was becoming apparent that the pension portion of the fund was falling behind. With safer working conditions, and with retirees living to older ages, it was obvious that taxes would have to increase significantly for the system to endure.
Our current rate of taxation for retirement and medicare is nothing more than a ponzi scheme, approved by the Majority Party who never looked back and tried to correct the original mistake. Both political parties failed to seek a permanent fix until 1983 when the Trust Fund was set up. Even then the majority party conjured up a scheme to pay insignificant interest on the money they would spend from the trust fund. There is confusion over the exact amount now in the fund, but it approaches 3 trillion dollars. At proper rate of interest, (6%) this now yields nearly 200 billion dollars per year. The original intent was that this fund would be used (wisely) to make Social Security and Medicare certain for the long haul. Yet in less than 20 years we can see the handwriting on the wall. This year we will spend some $500 billion dollars from current tax dollars to pay for Social Security.
SO HERE IS HOW WE FIX THE SYSTEM IN THREE STAGES. WE WILL KEEP THE RETIREMENT AGE AT 65, ASSURING EVERY CITIZEN A SOLID RETIREMENT.
- It will take 12 to 16 years investing the interest on the Trust Fund in a very broad segment of mutual funds. This time line is not crucial and may be varied if conditions warrant. However, sound financial management is very desirable since management has been lacking for the last 65 years. The magic figure for the size of the fund is somewhere near 10 trillion dollars. The fund must grow about 3% for the number of people on Social Security and another 2% to 3% annually due to inflation. At 6% interest per annum, the present '3 trillion dollars' will double to 6 trillion in 12 years. Thus in 24 years that debt owed to the Social Security trust fund will grow to 12 trillion dollars. But we do not have 24 years for the fund to mature. Note that there are many ways to manage this fund. If the national surplus the administration has predicted comes true, a sizeable portion can be put to debt retirement, especially benefiting the Social Security fund. However, if 200 billion dollars/year can be added to the fund with a 10% per annum return that Mutual funds have yielded for the past 100 years, at the end of 16 years our fund will expand by $7,908,939,900,000 for a total of 10.9 trillion dollars. Sound management is essential, and the investments into market accounts must be regulated to spread the funds over a very broad segment of stocks and funds. It is a limited breadth of funds that really becomes "risky". This $10 trillion fund will henceforth pay all necessary expenses of Social Security and Medicare, with only a slight risk of having shortfalls.
- In case of shortfalls due to market conditions, the general fund must stand ready to pump in a few dollars periodically. The stock market has maintained a 10-year, 10% average growth rate even through the depression, and for the past 100 years. Though the risk is small, the risk is still there, and needs to be covered ahead of time.
- The final and most important part of my blueprint for Social Security is to begin planning for it on the day a baby is born. Currently there are just under 4 million babies born each year in the United States. If we (the Social Security System) were to deposit $1000 into a 10% interest bearing account for each baby born, the cost would be slightly less than $4 billion per year. (Compare that to the current cost of over $500 billion per year.)
Having 65 years to grow, that sum will grow to over $500,000 if all goes exactly as planned. That size fund will allow payment of about $5000 per month to each person (male and female) who retires at age 65. If this amount seems too high, remember that at 3% interest per year the cost of all products doubles in 24 years, and at 2% doubles in 36 years. It is most likely that the $5000 figure is about the amount that will be needed. We cannot precisely predict the future.
However, if this interest projection varies over time, the net effect will be about the same. The amount of money needed by a retiree will vary in proportion to the change in interest rates, and will provide adequate benefit for all citizens. Survivorship benefits will be covered by this fund in full, because this fund will take 65 years to become fully effective. In the meantime, we will fully fund social security through the Social Security Trust Fund, used to endow the whole program.
My proposals are probably pipe dreams, lacking leaders who will see them through. But it CAN be done, and the difficulties are few. I hope to be elected to work toward this model, and otherwise to replace the income tax with a more fair tax similar to what I advanced 6 years ago. The people at fairtax.org have presented nearly the same program I proposed, and with or without some changes, this system will be more fair to wage earners, and will treat all citizens alike under the tax law. And, if we properly take care of social security, the maximum consumer tax rate will be at or near only 10%.