Math knows no ideology: the left gets realism on Social Security

According to this article (written by a representative of the liberal think tank “Third Way,”) Even some so-called “progressives” are waking up to the fact that Social Security is in dire need of reform.

This is great news. After all, as bad as the economy has been recently, if you’d invested in the S&P 500 at the beginning of 2006 (back when George W. Bush was talking about “privatizing” Social Security and before the stock market bust), you’d have still made some money in the stock market. That’s pretty good compared to the paltry rate of return provided by Social Security which doesn’t invest your money, rather robs tomorrow’s Peter to pay today’s Paul (as it has from the very beginning).

Of course, long-term and diversified investing is the way to go, so most investors would have made a great return for themselves for decades and would not have all their retirement money in stocks as they near retirement. But, as long as the government operates Social Security as a Ponzi Scheme, the system will continue to go further in debt and young people will continue to lose out on a reasonable return on their retirement dollars.

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2 Replies to “Math knows no ideology: the left gets realism on Social Security”

  1. Also, there are two payers into the Social Security System. First, the employee pays a fee, and Medicare is now a part of the payment. Then the employer pays a like fee, so that if the Social Security Tax Rate is, say, 6.5%, then the payment to the System is of course double that amount.

    Then keep in mind that there is no account for any tax payer, just that social security payments depend on the number of years of payments, well, number of quarters, and the rate paid in over the most recent 10 years before payments start.

    Recipients have the option of starting payments at age 62, or later, with the amount of payment increasing after age 62.

    There are numerous other options which make payments just too complicated to discuss.

    Suffice it to say that the money taken from wages, and from employers, if invested in no load mutual funds say, 60% stocks and 40% bonds, with some management, would produce a much more substantial return then payments from Social Security.

    1. Yes, it might. What about people who – say – find themselves unexpectedly disabled and in need of a way to live? Maybe it happens at an age too young for such a plan of private saving and investment to support them yet?

      There needs to be *some* sort of social safety net. What’s more expensive: providing a social safety net (maybe $20,000/year per person caught it in it) or imprisoning the people who fall through the cracks without it ($30,000/year or so just for prison costs, never mind judicial or police costs)?

      I’m all in favor of making hard economic decisions about these things, but the fact of the matter is this: poverty and desperation lead to crime, and crime is expensive.

      We just have to pick: would we rather spend money trying to get people on their feet as productive members of society, or punishing them for every stumble?

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