Friday, February 17, 2012

Give Me Your Lunch Money…

By: J Robert Giles

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“Part of your heritage in this society is the opportunity to become financially independent.” 

- Jim Rohn


The idea behind the Social Security program is a noble one. Like so many other important documents in American History (don’t worry Mr. President, I won’t use that pesky “C” word that rhymes with Constitution) the Social Security Act has been twisted and manipulated through decades of misinterpretation and exploitation. I apologize for going all “Rhyme Master Jesse Jackson” on you, but it had to be done.

In the very first paragraph of the Historical Background and Development of Social Security we are reminded that “all people’s throughout history have faced the uncertainties brought on by unemployment, illness, disability, death, and old age. In the realm of economics, these inevitable facets of life are said to be threats to one’s economic images security.” While I am positively ecstatic to see that the government understands death is a serious impediment with regards to earnings potential, I’m less than thrilled with anything I’ve heard from our government about fixing the problems Social Security faces. Lawmakers keep enacting laws by which honorably created systems and policies have become the weapons of our own destruction.

Social Security was the subject of manipulation before it even existed. Civil War pensions were awarded to survivors of soldiers killed in the Civil War. The very first “social security” type of a program. The surviving family would receive a monthly salary equal to that which the soldier could have earned if disabled instead of, you know…..deadsies. Soon, the disabled veterans got wind of this and the benefits program was amended so that they could receive benefits too. The manipulation came when much younger women would marry very old, and very disabled Civil War veterans because they would inherit the Civil War Pension benefits when the veteran died. Benefits from this program were still being paid to surviving widows as recently as 1999. That’s Civil War benefits being paid in 1999! The Social Security act as we know it today was originally unleashed in 1935. In it’s idea and original intent, the plan is admirable. Unfortunately, it’s original intent is a distant memory.

Decades of loopholes being exploited, politics determining accounting, and miscalculations to the tune of $800 Billion, the Trust Fund from which Social Security benefits are paid is drying up like an Arizona puddle in July. Every time a budget is released, the estimated year of solvency gets closer and closer. 2041… it’s 2036…next year it will be 2031….until we are finally told that the fund was actually used to keep Elvis Presley in hiding in a sophisticated lair somewhere in the South Pacific. Money has been siphoned off into various government programs under the guise of “temporary loans.” Loan implies intent to pay back the money. No such intent was ever given and no money has been paid back. Individuals have learned to “milk the system” and millions are receiving benefits that would not have been awarded under the intent of the original law. Congressmen have given passionate speeches about reforming the abusive looting, but very little has actually been done to stop it. This is not necessarily meant to be a blame game as any evidence I could throw out of a Democrat abusing the program, Republicans have done the same. The point is that changes are needed regardless of your individual party affiliation.

Brenton Smith, of Fix Social Security Now, LLC compares the current system of Social Security to “rearranging deck chairs on the Titanic to accommodate moreTitanic passengers.” He’s right. Although I’m glad Mr. Smith is willing to assume the role of financial genius, one is not required to see that Social Security does indeed need some fixing.

First of all, any Financial Advisor who lays out a Financial Plan for you in which the majority of your retirement years assume income provided by social security should be stripped of his licensing at a very minimum. Social Security simply can’t continue to provide the benefits it provides with the money it takes in. Another Brenton Smith quote that perfectly explains our current system is that we are essentially “charging our 401(k) contributions to our children’s credit cards.” That’s not really fair, is it? The idea of privatizing Social Security is always greeted with quick dismissal and incredulous argument from Congressional types. My personal argument, as is so often the case, completely dismisses the self-serving, manipulative, deceitful opinions of politicians and is instead based in logic. I understand that Americans, all of us, are complete idiots when it comes to spending habits. We are the reason the “impulse buy” was invented. With that in mind, it is admirable that the government tried to implement a system by which the latter years of our life are protected from disability, etc. The financial and social landscape of this country and the world have changed significantly over the lifetime of Social Security and it is time the plan itself get an overhaul to reflect such progress and to defend against the deterioration in work ethic and lifespan.

For example, according to the National Center for Health and Statistics, the average life expectancy in 1935 was 61.7 years. In 2010, it was 78.7. The retirement age was assumed to be 65 when the program was originally launched. The math was similar to that behind the low premiums of Term Life Insurance. Term Life Insurance is less expensive than Whole Life, or Permanent Insurance because all the risk is assumed by the policy holder. In order for you to receive anything for the premiums you pay into a term policy, you have to die within the “term.” They have entire teams of nerds down in the corporate “Nerdery” that determine the likelihood of you dying within that term and they come up with a premium based on that calculation. (Drastically paraphrased and simplified explanation. Somebody toss some pocket protectors and asthma inhalers down into the aforementioned nerdery before we have a socially awkward uprising on our hands.) The same can be said of the original Social Security plan. The theory was that many would pay into the system for decades only to die before claiming any benefits to which they were eligible. Kind of morbid financial philosophy, but sound. For that particular time. The problem is that very little was done to combat the fact that people began retiring earlier and living longer, thus taking more from the plan than originally projected. That, on top of the fact that Congress raided the coffers with alarming frequency and an epic mess was created. It’s time for change.

The first and most apparent change I can see is to get Social Security immediately and irrevocably out of the hands of Congress. Much of this argument will be met with applause from those on the right side of our political system because it suggests limiting government. That’s exactly what I suggest. Limit government so that they can no longer spend MY money on things I don’t want, need, approve of, or know about. I don’t believe I should support a system that our own government sees as “unsustainable.” I don’t believe I should be asked to cover up the crimes of career politicians with more of my money. That does not mean that I believe we should shut down the idea of saving Congress for retirement or preventative saving. I just believe the system by which both are done should be updated to reflect current actuarial and morbidity statistics; the financial landscape and options of today’s market; today’s spending habits and overall financial attitudes. Millions of Americans contribute the maximum allowable amount to various retirement accounts every year. Millions of Americans pay for some form of disability insurance every year, whether it be short term disability to cover birth and maternity leave, or long term disability to cover catastrophic injury. The point is that everything the Social Security program was originally intended to cover can now be covered on a much more personalized level through private means. Enact laws that require Americans to cover these “inevitable facets of life” as the Social Security Administration refers to them. Payment into some kind of future protection is required by law, but just like an IRA, citizens would be allowed to choose the kind of protection that best serves their individual needs. The current system does not attract new money because no one wants to toss money at a doomed investment. The money that the current system does manage to attract is not accurately or prudently managed. Give Americans the choice to pay more into the system if their individual position allows, or to pay less if they choose to invest elsewhere, or not at all. You are paid according to what you put in. If you pay $50 for a steak you sure as heck better get more steak than the guy who pays $10 for a steak sandwich. And if you choose to go to a pricey steak-house, surrounded by ambience and welcoming wait-staff, you should expect to get a little more for your money than the guy ordering the steak and eggs at the all night diner across the freeway from the airport. Give us a choice.

People will scream that this is just another step toward socialism but I whole heartedly disagree. First of all, socialism wants everything controlled by the government… Americans a choice is anything but socialism. Put competition to work in the financial field. Let them compete for our business. The ones who manipulate or take us for granted will collapse. No more bailouts. It’s time for change in every “inevitable facet” of our lives but the most urgent change is the change in the attitudes of America itself. We have to believe the changes we want are possible and we then have to go out there and make it happen. Will the ultimate Social Security program look anything like the one I’ve described? Possibly. There will be some negotiations and concessions, but in the end there will be change. There will be change because we are demanding change in every part of our lives now owned by the people we elect. We’re taking back our future before it evaporates like Obama in a bath of Holy Water. The tightly coiled, corn-backed rattlesnake of a budget that His Barackness laid on the carpet of America last week is just another example of the changes we must force. We can’t leave our future in their hands and expect them to cherish the responsibility. They’re the bullies who keep taking our lunch money, but guess what……that kid they used to pick on and steal from…..he hit a growth spurt over the summer and he’s looking to exact a little revenge!

As always, thanks for playing.


J Robert Giles

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