RMC: I see we’re starting off with a pretty big and complex question. I sure hope this doesn’t eat up all our time here today. But, let’s get to it.
As you may recall, Thinking Outside the Boxe crafted a comprehensive Social Security reform plan back in 2005 which we submitted to various members of the Congress, the President, the Vice President, etc. Evidently, no one liked that proposal that included a national lottery, much like the Powerball, with the proceeds going into the Social Security Trust as well as an increase in the payroll tax and the creation of private accounts. We subsequently updated this proposal in 2006 to include stiff fines and penalties for illegal immigrant workers, higher payroll taxes for immigrant workers, and limited benefits for workers born after 1985. I don’t really think the Congress or any President has an interest in real reform until the time comes when there is no money in the system. At that point, they’ll either raise taxes and kill the economy or just end the system. Either way, the taxpayer gets screwed.
The reality is that the system as we know it today will not be around for younger workers when they’re ready to retire. It’s disingenuous for us to suggest that it will be. Poor Rick Perry took a lot of heat for talking frankly about this issue. The system as we know it is, indeed a Ponzi scheme. We’re taking money from workers today to pay for people who are retired. We’re getting close to the point where baby boomers are going to retire in large numbers and put a massive financial strain on the system—more money going out than is coming in. The stagnant economy isn’t helping with this matter either where there’s fewer dollars being paid in right now because of high unemployment. At some point, the music stops and one generation isn’t going to have a seat.
We still support the creation of private accounts for younger workers. Let me be clear, this only works for younger workers. Those at or nearing retirement age obviously don’t have the luxury of socking money away in a private account, so they’ll get the benefits they’re promised. We really can’t do much about current retirees or those getting ready to retire in the next decade. We’ve made a commitment to them, so we’ve got to live up to it, but we’ve got to start transitioning to some kind of private account for younger workers and encouraging them to be putting money away and saving for their retirement. IRAs and 401k plans are great ways for younger workers to start saving and planning for their own retirement and we should certainly encourage more of that kind of personal responsibility.
These are two separate things, of course. The 401k and IRAs are personal contributions. A private account for the Social Security system would mean that a portion of the worker’s payroll taxes go into the account with their name on it to be invested in a well diversified portfolio that will hopefully earn an annual return in excess of the 1% return being earned on the Social Security assets, if that in this low interest rate environment. We’ve got to fund the transition somehow, you know, the gap that’s created by having current obligations and cash outflows and the money that is now be diverted to the workers’ private accounts. Part of the problem can be alleviated by getting people back to work but that’s not a cure all. We need to eliminate fraud and waste in the system. That will help close the gap by billions of dollars annually. We’re probably going to have to extend the retirement age for younger workers by two or three years. We need to get immigrant workers on the tax rolls so that they’re paying into the system. We need some kind of means based testing, which is highly unpopular. And ultimately, there will probably have to be some kind of a tax increase, which we abhor but that’s the reality of the situation.
That’s just Social Security. Medicare is an even bigger problem from a financial perspective. There’s trillions of unfunded liabilities there. It’s the giant gorilla in the corner that no one wants to talk about. We’ve looked at this issue extensively, but we haven’t put together a formal study or policy on it. Here again, we need to eliminate the massive fraud and waste in the system that will alone save billions annually. We need to focus on driving down healthcare costs which will require tort reform and eliminating frivolous lawsuits that drive up doctor’s insurance premiums and rates as well as increasing competition in the insurance markets. Means based testing is another option though highly unpopular for a variety of reasons. Tax increases will probably happen down the road though we don’t support that. We need to transition younger workers out of the system to forms of private health insurance and health care so that the long-term liabilities are finite. We need to lead healthier lifestyles that help reduce chances for certain diseases. We need to focus on stem cell research as ways to cure or treat diseases that create massive burdens on health care costs. Preventative health care has amazing long-term benefits in reducing the financial burden on the health care system.
Welfare is pretty small compared to the black holes caused by these programs. The argument can be made that there’s always going to be a certain number of people on welfare that we need to take care of—the infirm, the handicapped, those who legitimately can’t work. I hate to beat a dead horse, you know, but there’s massive fraud in the welfare system. There are people who are perfectly able to work who just want a free ride. There are people who are out making babies just so they can get a bigger check. And what’s sad in all of this is that those people who are abusing the system are taking from others who legitimately need assistance—the single parent who lost a job and can’t find work in this economy and who needs temporary assistance. Those working but with incomes below the poverty line who don’t qualify for assistance. We need to have finite time limits for available assistance, much like unemployment. We need disincentives for people having children just to get more money. We need to make each recipient get drug tested before they get a welfare check. If you test positive, guess what? No, check for you. We need to have a vibrant economy where jobs are being created so that there are opportunities for people to work and support themselves.
These are three big, tough issues. The first two entitlement programmes will bankrupt the United States if something isn’t done. Ultimately, they’ll just increase the payroll tax and extend the retirement age to keep kicking the can down the road so that someone else, the next generation has to deal with it. Ours isn’t the only proposal for these issues. Other people have other ideas and solutions. We need to find something that works and tackle the problem instead of brushing it under the rug.
As for the extended unemployment benefits, at some point it becomes a disincentive to go out and find work. People might have to swallow their pride and their egos may take a hit if they have to work a job that they feel is beneath them, but you do what you’ve got to do. We are in tough economic times but things are starting to look a little better if you believe the numbers that are coming out on the economy, so I think we stop the extended benefit period as soon as possible. All it’s doing it placing a drain on the government’s finances, and we really can’t afford that right now.
Michigan: Social Security must continue for the people who are now receiving that benefit. In many cases it may be the only income that they have. If we are to continue as we are now, the cap on wages must be removed to help fund the programme. At some point, we will have to set a date when this programme is phased out. Many types of savings plans have been established with tax benefits that will have to be used. Medicare as it is structured now will also have to be redone. The fraud and waste must be eliminated. More walk-in type clinics need to be established and can be staffed with physician assistants who can care for 80% of medical issues. As these will be government clinics think of the paperwork and fraud that could be eliminated. Medicaid and welfare must be redone. We are paying for many adults and children that have never paid any taxes let alone be citizens. We cannot leave our own citizens on the streets to die. We can help the rest of the world, why not divert that money back to the U.S.?
Sydney: I don’t have a plan to reform these things. Surely this issue is one that our elected representatives, and particularly the President need to sort out (especially given the economic climate). Obviously costs to Government need to be reduced but at the same time we have to look after the needy.
Extended unemployment benefits definitely make sense at the moment. It’s got to be a no-brainer when the economy is doing so badly and unemployment is high. At the same time it seems stupid to me that both the Federal Government and the States deal with unemployment. Surely it would make more sense for either the Government, or the States individually to look after all issues relating to unemployment. The current system seems like an unnecessary duplication. Maybe at some point extended benefits could partially go towards further training or education. The real issue is getting people jobs.
Cartwright: I’ve read the previous proposals by Thinking Outside the Boxe, and I wholeheartedly support those proposals. I, however, am of a more hard line approach. Our founding fathers never intended for the government to provide for seniors in old age. Back then, the family or the community or the church took care of those in need of assistance. I think we need to get away from the government taking care of people, particularly when it comes to retirement. This is an issue of personal responsibility. Now, let me be clear. We’ve made a commitment to today’s seniors and those nearing retirement, so we have to honor that.
The problem started back when companies had generous pension plans for employees. These people retired with great retirement compensation that was usually a function of their ending salary and their health care benefits. Those legacy costs ultimately bankrupted a lot of companies. But this created a moral hazard. These workers knew that there was going to be this pension package so they went out and spent what they earned, lived the good life, and didn’t really worry about planning ahead. And the Social Security system contributes to that moral hazard. Well, the government is going to take care of me, so why should I save? Why don’t I just have a good time?
It really gets me when you see these baby boomers bitching about not touching their retirement because they paid for that. Well, let’s have a reality check. You’ve been paying for your retired parents and their generation. Younger workers today are going to be paying for your retirement. But a lot of these baby boomers have done a whole hell of a lot to save and plan for their retirement. And it’s the ultimate hypocrisy that they’re not willing to make any sacrifices to save Social Security. I think it’s a very un-American attitude, but it’s an attitude that is pervasive in society nowadays.
So, how about this plan? It’s real simple. If you were born after January 1, 1995, there will be absolutely no social security for you. That’s right—no Social Security check, no Medicare, no private accounts, nothing. The people need to start saving for their own retirement. If they start at seventeen or eighteen years old, they’ll have plenty by the time they retire. Now, I know what a lot of people are thinking. These people don’t have the extra money to set aside in a retirement account. Well, I would argue differently. Perhaps they will need to make sacrifices—perhaps they don’t need the newest and most high tech cell phone every six months. Perhaps they don’t need everything they want. Novel concept isn’t it?
But let me make a few points about this plan. Existing retirees and baby boomers don’t have to worry about anything. They’re going to continue to receive their benefits, because each and every worker is going to be paying their payroll taxes just like it is now. We know how many people there are in America today. We can figure out how many were born before January 1, 1995 and who would still be eligible for the Social Security programme. So, the actuaries can use their mortality tables and do their magic to come up with the remaining estimated liability for the Social Security Trust. What we’ve in effect accomplished is cutting off the infinitely growing unfunded liabilities and turned that into a single number. We’ll know how many people will be eligible to participate in the plan, and when they’re all deceased, the plan is over. The payroll tax will gradually decrease as beneficiaries decline in numbers.
In the meantime, the younger crowd will have to start taking advantage of IRAs, 401k plans, health savings accounts, etc. We’ll also need to address fraud and waste in both the Social Security and Medicare programmes. That will help reduce the ongoing costs associated with these programmes. In addition, we need to remove the cap on Social Security taxes. Right now, you only pay Social Security on up to $106,800 in wages. Let’s remove that cap and make all wages taxable for Social Security purposes. That will bring in additional funding for the trust, and that will help keep it solvent a while longer. As the economy improves and people get back to work, obviously more funds are going into the Social Security trust and Medicare.
With regards to welfare, I think there needs to be a time limit on receiving benefits as well as mandatory drug testing. I agree that we need to take away incentives whereby you get more money if you have more kids. Let’s do the opposite. If you have another kid, you get less of a welfare check. When the first settlers came to this land, they had a simple concept—if you don’t work, you don’t eat. I think we need to get back to that basic concept. It’s tough love, you know? I’m compassionate for the infirm and the handicapped, but we’ve got a problem with generational welfare. These are people that are perfectly able to work but are just too lazy. They’d rather stick their hand out to the government and get their free money.
I had the displeasure recently of seeing a document called The Wild Wonderful Whites of West Virginia. It is a sad reflection of the fraud and waste in the entitlement programmes. Here you’ve got a bunch of drug head drunks who have, by their own admission, been on Social Security disability and welfare since they were like twelve years old. Yeah, their father got them on Social Security disability at that age and they’ve been riding the government band wagon ever since. These are people that are doing drugs, dealing drugs, and have no useful purpose in society. Hell, there was one girl that was doing lines of cocaine in the hospital room just after she had a baby. Then she wonders why social services took the baby from her. This is the type of fraud and waste that is rife in the entitlement programmes.
We need to put an end to it. Honestly, if you’re too lazy or too strung out to work or be a productive member of society, you should be cut off from every benefit that may be available. You can just starve to death or crawl in some ditch and die. The world isn’t going to miss you.