E-Newsletter No. 21
If not us, who?______If not now, when?
Many of our recent newsletters have covered the creation (and subsequent expansion) of the “Entitlement State”. Unfortunately, the first step that our federal government took on this road towards fiscal irresponsibility started in 1935 with the “unfunded pension benefits” created under the Social Security program. We should keep in mind that this program was established with the best of intentions, which was to create a government program that would help keep elderly retirees out of poverty. However, the program provides an entitlement benefit to nearly all US citizens, without regard to a person’s / family’s financial needs during retirement. This is the fundamental flaw of the Social Security program.
In this month’s newsletter, we would again like to direct you to our Foundation’s website (F2PPR.org) and the Join the Conversation page, where we have posted “A Letter to Senator Bernie Sanders regarding Social Security” http://www.f2ppr.org/wp-content/uploads/2013/11/A-Letter-to-Senator-Bernie-Sanders-regarding-Social-Security.pdf . The letter discusses five “hypothetical” US citizens, their working careers and total wages, and the resulting amounts that they receive from Social Security.
As the letter points out, most of the scenarios do not make any sense (at all). A “Barely Eligible Recipient” who earned minimal wages for the minimum number of years needed to qualify for Social Security would receive a monthly benefit of $112 per month, or $1,344 per year. We believe that if this person doesn’t have any other financial means, they are probably someone who would need to receive assistance from the government or a charitable organization, but they aren’t getting much from Social Security.
Conversely, a hypothetical “Upper Middle Class Recipient” who earned wages equal to the Social Security wage cap each year (a total of $2.7 million) would receive $601,692 in Social Security benefits during their retirement, which is an amount that exceeds their contributions into the program by $433,591. This individual receives 3.6 times as much as they paid into Social Security. What’s even worse is that a “Very Well Off Recipient” who made twice the Social Security wage cap (a total of $5.4 million) would also receive $601,692 in Social Security benefits. So, here is the fundamental question – Why does the federal government pay pension benefits (and relatively higher amounts) to “financially secure” people who probably don’t need to receive these payments?
Our Editorial Board believes the reason that 8 out of 10 people think Social Security is such a great program is that many of our country’s citizens get back more than five times the amount they pay into the system. However, another way to look at Social Security (and any other “entitlement” program) is that our country’s citizens are being bribed with our money. What’s even worse is that (in reality) it is our children’s and grandchildren’s money, because there is no actual cash in the Social Security “Trust” (only intergovernmental IOUs). All of our payroll tax withholdings have already been spent (along with another $18.3 trillion that the government has borrowed against future generations).
As we recommend in The 2020 Initiative, Social Security should be transformed over a multi-year transition period into a means-tested welfare benefit. Eventually, these unfunded pensions should be phased out, and a “financial security” welfare benefit should only be paid to those elderly retirees who need assistance. Otherwise, this program will continue to steal huge sums of money from our children and grandchildren.
US Debt Clock – – August 1st – $57,032 per citizen / September 1st – $57,120