"Government is not reason; it is not eloquence; it is force! Like fire, it is a dangerous servant and a fearful master."
George Washington.
|
" ... There will always be a party for giving more to the rulers, that the rulers may be able in return to give more to them. Hence as all history informs us, there has been in every State & Kingdom a constant kind of warfare between the governing & governed: the one striving to obtain more for its support, and the other to pay less. And this has alone occasioned great convulsions, actual civil wars, ending either in dethroning of the Princes, or enslaving of the people. Generally indeed the ruling power carries its point, the revenues of princes constantly increasing, and we see that they are never satisfied, but always in want of more."
-- Benjamin Franklin, in a letter to the Federal Constitutional Convention, as recorded by James Madison on June 2, 1787.
|
Read Ayn Rand's book Atlas Shrugged
Cato Institute, Mar. 11, '99, by Carrie Lips, a Social Security analyst at the Cato Institute
Saving is a virtue. That's what we're taught as children: we learn Franklin's memorable phrase, "A penny saved is a penny earned," and absorb images of dutiful squirrels packing nuts away for the winter.
In talking about the need to "save" Social Security, president Clinton has paid lip service to the virtue of saving. Unfortunately, his actual reform proposal leaves in place a tax-and-spend system and fails to give individuals a real opportunity to save.
In fact, the centerpiece of the president's proposal has nothing to do with Social Security at all. Instead, he suggests creating a new "savings entitlement" with the clever moniker "USA Accounts." So far, we don't know much except that it will leave the current Social Security program unaltered while it uses up 12 percent of the projected budget surplus. At best, individuals might get a small amount of money back from the government for an account.
But this gesture toward savings is dwarfed by the federal government's gigantic anti-savings retirement program: Social Security. Each year Social Security swallows up 12.4 percent of each worker's paycheck with one hand and then sends out checks worth $400 billion to be consumed by retirees with the other hand. This means a worker who earns $20,000 a year loses more than $2,000 to Social Security. This is money that is not saved and is not earning interest for that individual. The lost opportunity for this worker is considerable: $2,000 per year in an account that provides an annual return of just 5 percent would grow to be more than $150,000 after 35 years.
Instead, Social Security takes this revenue and promises workers a defined benefit. At best, the payments will represent a 1 percent rate of return for young workers; but many young workers can expect a negative return on the dollars they send to Social Security. According to Lawrence Kotlikoff, professor of economics at Boston University, the average 20-year-old male can expect to pay $182,000 more in Social Security taxes than he will receive in benefits. That's hardly a savings program, by anyone's definition.
Another indication of the president's disingenuous approach to encouraging savings is his reference to the Social Security "trust fund" as a "savings account." The president proposes increasing the value of that trust fund by an amount equal to 62 percent of the budget surplus and claims that such a move would help pay benefits when payroll tax revenues start to lag behind obligations. But the trust fund is not a savings account. The trust fund consists of nothing but government bonds, which are simply claims on future taxpayer dollars.
To understand the distinction, the president needs only to read the fine print of his own budget. Page 337 of the president's budget states plainly: "These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures - but only in a bookkeeping sense. ... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits."
In fact, the trust fund is better understood as a liability than an asset. The amount in the trust fund represents what we are forcing future generations to pay - in addition to their payroll taxes - to provide the Social Security benefits we have promised ourselves. Try to explain the value of this "savings account" to taxpayers in the year 2030, when they have to cough up hundreds of billions of dollars to pay off the IOUs in the Social Security trust fund.
If the administration really wants to encourage savings, there is one straightforward, simple solution: let individuals use the money they already spend on Social Security to fund a personal retirement account. This would allow all workers - including those who don't have the money to participate in other savings programs - to take advantage of the power of compound interest and accumulate substantial personal savings. Such a plan would reduce the multi-trillion-dollar debt that will otherwise be passed to the next generation. Moreover, by giving all workers first-hand knowledge of the power of compound interest, it will serve as a much-needed reminder that a penny saved is truly a penny earned.
ANNUAL
WAGE/SALARY | ANNUAL FICA
WITHHELD plus
employer match | MONTHLY FICA
WITHHELD plus
employer match | ANNUAL FED
INCOME TAX
WITHHELD
1 exemption | STATE
TAX
2% | CITY TAX
.5% | ANNUAL
NET in your
pocket | SALES TAXES
7% OF NET |
| $10,000 | $1,530.00 | $127.50 | $1,500.00 | $200.00 | $50.00 | $7,416.67 | $519.17 |
| $15,000 | $2,295.00 | $191.25 | $2,250.00 | $300.00 | $75.00 | $11,125.00 | $778.75 |
| $20,000 | $3,060.00 | $255.00 | $3,000.00 | $400.00 | $100.00 | $14,833.33 | $1,038.33 |
| $25,000 | $3,825.00 | $318.75 | $3,750.00 | $500.00 | $125.00 | $18,541.67 | $1,297.92 |
| $30,000 | $4,590.00 | $382.50 | $4,453.20 | $600.00 | $150.00 | $22,296.80 | $1,560.78 |
| $35,000 | $5,355.00 | $446.25 | $5,853.20 | $700.00 | $175.00 | $25,355.13 | $1,774.86 |
| $40,000 | $6,120.00 | $510.00 | $7,253.20 | $800.00 | $200.00 | $28,413.47 | $1,988.94 |
| $45,000 | $6,885.00 | $573.75 | $8,653.20 | $900.00 | $225.00 | $31,471.80 | $2,203.03 |
| $50,000 | $7,650.00 | $637.50 | $10,053.20 | $1,000.00 | $250.00 | $34,530.13 | $2,417.11 |
| $55,000 | $8,415.00 | $701.25 | $11,453.20 | $1,100.00 | $275.00 | $37,588.47 | $2,631.19 |
| $60,000 | $9,180.00 | $765.00 | $12,898.20 | $1,200.00 | $300.00 | $40,601.80 | $2,842.13 |
| $65,000 | $9,945.00 | $828.75 | $14,448.20 | $1,300.00 | $325.00 | $43,510.13 | $3,045.71 |
| $70,000 | $10,710.00 | $892.50 | $15,998.20 | $1,400.00 | $350.00 | $46,418.47 | $3,249.29 |
| $75,000 | $11,475.00 | $956.25 | $17,548.20 | $1,500.00 | $375.00 | $49,326.80 | $3,452.88 |
| $80,000 | $12,240.00 | $1,020.00 | $19,098.20 | $1,600.00 | $400.00 | $52,235.13 | $3,656.46 |
| $85,000 | $13,005.00 | $1,083.75 | $20,648.20 | $1,700.00 | $425.00 | $55,143.47 | $3,860.04 |
 | FRAUD!!! |
J U L I E M O U G E O T T E
|
| He Said,
She Said… |
|
 |
Let Americans save and invest their own hard-earned money without government interference. Anyone who really saves and invests 12.4 percent of their income can, over their working lifetimes, make themselves financially independent millionaire retirees, not poverty-stricken elderly of the "Social Security class," regardless of the job they choose.
Social Security is, in fact, the single tallest, most difficult hurdle standing between most working-class Americans and their hopes for security in their senior years. Let's recognize this fact, and let's end it now.
| "On Opting Out"
Alan Greenspan, Fed. Reserve Board Chmn.
"My own preference is strongly in the direction of moving towards a privately financed system."
|
|
|
Edward H. Crane, Pres., Cato Institute
"Social Security privatization is, nowadays, the single most important step toward a society of liberty. It combines personal freedom with widespread property ownership, and those are the pillars of a free society."
|
THE SOCIAL SECURITY TRUST FUND ACCOMPLISHES NOTHING, Heritage Foundation Backgrounder No. 1256, Feb. 22, '99 by Daniel J. Mitchell, McKenna Senior Fellow in Political Economy in The Thomas A. Roe Institute for Economic Policy Studies
TAKING SOCIAL SECURITY PRIVATE, Investors Business Daily, Mar. 17, '99, by Aaron Steelman
Stop the Social Security Poverty Machine, Deseret News, Mar. 8, '99, by James Ferrin, a certified financial planner based in Orem
WHY SOCIAL SECURITY IS BANKRUPT, Brainstorm Magazine, Feb. '99, by Ted Abram, American Institute for Full Employment
More short columns
CLINTON'S SOCIAL SECURITY SHELL GAME, Brainstorm Magazine, Feb. '99, by Charles D. Hobbs, Program Director for the American Institute for Full Employment, and Domestic Policy Advisor for Pres. Ronald Reagan, 1984-89
NORTHWEST COMMENTS ON REFORM, Brainstorm Magazine, Feb. '99
Short Columns, That should infuriate you and make you vote for anyone not democrat or republican
A Real Solution to the Social Security Crisis: Testimony of José Piñera, President of the International Center for Pension Reform, Co-Chairman of the Cato Project on Social Security Privatization before the U.S. House Committee on Ways and Means, February 11, 1999
THE SOCIAL SECURITY TRAP, Intellectualcapital.com, Jan. 21, '99, by James K. Glassman, the DeWitt Wallace-Reader's Digest Fellow in Communications at the American Enterprise Institute
SOCIAL SECURITY MEETS THE 21ST CENTURY, Cato Policy Report, Feb. '99, by José Piñera, co-chairman, Cato's Project on Social Security Privatization
SOCIAL SECURITY INVESTMENTS MUST BE MADE BY WORKERS THEMSELVES, Los Angeles Times, Feb. 21, '99 by U.S. Rep. Christopher Cox, (R-Newport Beach), Chairman of the House Policy Committee
FATAL CONCEIT IN SOCIAL SECURITY SUBSIDY, The Wall Street Journal, Mar. 2, '99, by Thomas J. DiLorenzo, Professor of Economics, Loyola College
PRIVATIZE SOCIAL SECURITY ... FOR THE CHILDREN, Investor's Business Daily, Feb. 22, '99, by Doug Bandow, a senior fellow with the Cato Institute
SOCIAL SECURITY REFORM URGED, Denver Post, Feb. 17, '99, by Steve Raabe
THE ADMINISTRATION'S BEWILDERING ASSERTION, Cato Institute, Feb. 19, '99, by Michael Tanner, director of the Cato Project on Social Security Privatization
NINTH-GRADERS WORRY ABOUT THEIR FUTURE, Binghamton Press, Feb. 22, '99, by Wyn Hornbuckle, Staff Writer
GOVERNORS OPPOSE SOCIAL SECURITY FOR STATE WORKERS, Reuters, Feb. 23, '99
A DIFFERENT SOCIAL SECURITY IDEA, The Chattanooga Times & Free Press, Feb. 21, '99, Editorial
