Diary

So What if Social Security Checks Don't Go Out...

Today, August 2 is D-Day in the debt debate, and there has been one constant mantra throughout – that the Social Security checks MUST go out.

So how about if these checks are held back as an indicator of the seriousness of our economic plight? After all, Social Security has created much of this plight.

So how about if Democrats are forced to explain to millions of SS recipients that the whole SS system that they invented is a massive Madoff Scheme right from the start, and that it is unsustainable, and has been falling off since the day the first check was issued?

Because over the last 71 years, since the first SS check was issued to Ida Mae Fuller of Ludlow, Vermont in 1940, the amount of money flowing into Social Security per recipient has been proportionally going down, down and down as taxes have gone up and up. In other words, the American debt crisis explained.

When George Bush proposed to reform Social Security, the media and the Democrats shouted him down. Just like when George Bush and John McCain both warned about Fannie Mae, they were ignored.  And then Fannie collapsed, along with its sister government agency Freddie Mac. Which set off the whole economic crisis we are now in. Again, government was at the heart of it.

Indeed Social Security effectively collapsed long ago. Because what SS already has done is to take trillions and trillions of dollars from the baby-boom generation – many of them ardent leftists who support SS wholeheartedly – spent the money and now has little money going forth to pay out to the baby-boomers who paid into it.

In other words, for every person “saved from poverty” by Social Security, we have another person or two who will be thrust into poverty because SS took so much of their wealth. Because that is how all government programs work: They start out all full of hope and promise and end up destroying many more people than they help.

Social Security is not a retirement system but a wealth-redistribution system. Its goal is to funnel through the government trillions of dollars and to distribute them as the government sees fit. And low-income people benefit from SS much more proportionately than all others, often after paying in very little.

For those who don’t know, here is how Social Security works:

For simplicity, imagine you make $10 an hour and work 10 hours a week. You earn $100. When you receive your $100 check, you find that 6.2% has been immediately deducted from that total . That is the Social Security tax, or $6.20. That is just for Social Security. This excludes all Medicare, federal and state taxes that are withheld.

That 6.2% of your entire check is different from the original plan signed by Roosevelt in 1937. The original debit to your check was 1% of only the first $3,000 that you earned. So as the libs tell you how wonderful Social Security is, they never tell you that your taxes today are 6.2 times what they were at the start. That would be like gasoline at $23 a gallon today.

Yet one group that does not pay into Social Security today is public school teachers in 14 states and many other government employees. And they are happy with this arrangement because they know that SS is a terrible system. Yet public schools teacher unions are all lefty Democrat liberal organizations that support Social Security wholeheartedly.

For other people, that is.

OK, so you pay $6.20 or 6.2% of your check. But the real amount you pay into Social Security is 12.4% or $12.40 of your $100 paycheck. And you might wonder: Where does the other 6.2% come from?

Here’s the deal: They tell you that you pay $6.20 and that your employer also pays $6.20, or “matches” your contribution. Just as the original debit was 1% of the first $3,000 out of your paycheck, while employers also paid 1%.

But what really happens is this: Of your $100 check, you send $6.20 cents to Washington for SS. It is deducted from your check and your employer sends a check to the Treasury for $6.20 under your name. Then your employer also has to send $6.20 to the Federal Treasury on your behalf for your SS account, ‘matching’ your figure.

It is all nonsense, however. Because your employer knows that he really is paying you $106.20 for 10 hours, or $10.62 an hour. He’s not stupid. It is all accounted for in your salary ahead of time. He pays you $10 an hour (your stated pay rate) because he knows he can afford to pay you – and really is paying you – $10.62 an hour. He’s not just giving you that 62 cents an hour for SS.

So your employer does not “match” your Social Security contribution. You pay ALL OF IT. You pay 12.4% of your salary into Social Security. This is a huge amount of money. So if your stated salary, in round numbers for simplicity, is $10,000 a year, your real Social Security salary is $10,620 (what your employer is really paying you, including his share of your SS payment) and you send a whopping $1,240 to the government just for Social Security! Forget Medicare (2.9%), federal, state, excise, gasoline, property and all the other taxes. On $30,000, the figure is $3,720. Wow.

THAT IS A LOT OF YOUR MONEY…

So what happens when this $12.40 check from your $100 earnings arrives in Washington?

A computer operator types in that John Doe, SS# 123-45-6789, sent us $6.20 this week, and so did his employer, so John Doe is credited with having sent $12.40 into the system.

But this is not any kind of account that has real money in it. It goes onto the ledger sheet that you receive in the mail every year. It says, in effect, that John Doe paid XXX dollars into Social Security this year and has paid a total of XXX dollars into Social Security over his lifetime, with each year listed.

You cannot get any money out until you pass 65, or 62 for early retirement. That printout just shows your contributions.

And if you die before retiring and you are single and have no wife or children, the government just takes your money. Isn’t that swell? Nice socialist government…

So where does the actual money go, your $12.40?

It is immediately distributed to people who are collecting SS checks today. And the SS system is now starting to take in less money than it is paying out. And this comes after SS payouts have been proportionally declining for decades.

In 2010, 44 million people were receiving retirement SS benefits and a whopping 10 million were getting “disability” benefits, a program that is rife with massive fraud. SS today is consuming 20% of the federal budget or about $720 billion. And SS will soon need outside government subsidies if it is going to keep paying out at the rate that it has been. We conservatives have been warning about this system for decades, that it is just an economic ‘chain letter’. But Democrats refused to listen. When Bush tried to reform the system, he was shouted down.

Now the system cannot continue to pay out so generously as it has, but decreasingly generously, and require more taxes, for several reasons:

The first person in America to receive a SS check in 1940 was Ida Mae Fuller of Ludlow, Vermont who paid in a total of about $24 and received more than $23,000 in benefits because she lived to be 100 years old.

Who today would say that they are going to get out almost 1,000 times more than they paid into Social Security?

Only a crazy person…

When Ida Mae retired, the retirement age for Social Security had been set at 65, which is the same as today. But in 1940, the average lifespan was only 63.6 years. Setting the retirement age at 65 in 1940 would be the equivalent of setting the SS retirement age today at 79.4 (or 1.4 years longer than the average lifespan of 78) which would immediately give the system hundreds of billions of extra dollars because so many fewer people would be collecting their checks. No wonder Ida Mae did so well.

Second, there were said to have been 42 people paying into Social Security in 1940 for every person collecting a check. So people like Ida Mae were like the name at the top of the list for one of those ‘chain letters’ that you got in college. The first person on the list makes the most money from all the people further down, and everyone further down gets less and less.

Today, however, as the baby boomers retire, there are going to be about TWO people contributing to SS for each person collecting a check. In other words, the workforce today is about 150 million people, but soon 77 million Baby Boomers are going to retire. They already have started retiring.

See the “fuzzy math”?

And with people today having an average life expectancy of 78 while retiring at 65, there already is a huge shortfall in the system, i.e., payouts are shrinking while taxes have risen steadily from the days of Ida Mae Fuller. And with more and more people living longer and longer lives, many over 100, the system not only is going bankrupt today, but payouts are going to shrink dramatically in the future… unless taxes are raised through the roof – which is the Democrat solution to everything including SS.

And what happened to trillions in Social Security surpluses that could have been built up over the decades during the flush years?

Answer: Democrats arranged in the 1960s to “commingle” SS funds with general government funds and the money was spent. Any surplus is long gone. The SS ‘lock box’ is long gone. Typical Democrats…

And who was exempt from SS taxes until 1983?

Congress was, run by Democrats for many, many years.

Now, imagine hypothetically that you – or even a husband and wife working together – earn an average of $80,000 a year for an entire working life from age 18 to age 65. Since Social Security and Medicare together take 15.3% per year (12.4% Social Security, 2.9% Medicare) that amounts to $12,240 per year.

If that same money were put into a simple savings account, it would amount to $575,280 at retirement without even factoring in compound interest. That account would not be a computer printout of what you ostensibly are entitled when you retire, as Social Security is, but would be an actual account with your name on it, real money that nobody else can touch. Compound it by normal interest rates and that money would multiply substantially. Invest wisely and it could increase significantly. And when you die, it goes to your spouse and then your children.

And that does not even include your private pension and savings!

Now imagine that that same money ends up in Social Security. Then imagine you get some small payment dribbled out as SS collapses. Thus a huge account that you could have accumulated over your lifetime is being denied to you by the ‘caring’ leftists who initiated Social Security. Perhaps the real ‘robber barons’ of American history are the people who created Social Security. Take the Enron scandal, multiply by thousands, and you have the scandal of Social Security. Trillions of dollars are disappearing.

Meanwhile, the media love to report on elderly people barely scraping by on Social Security, while many of these same elderly would be much better off if SS had never existed and they  had their own savings. And this situation is going to get much, much worse as the baby-boomers retire. Some projections show that Social Security is going to consume 100% of the federal budget by 2036. And to demonstrate the corrosive nature of socialism, Social Security consumed 0% of the federal budget in 1936.

Conservatives have proposed sensible solutions, all of which have been rejected by Democrats. Those solution, which are guaranteed to work are: Raise the retirement age to 70 and then 72, since people today are healthier and live much longer and more productive lives. Allow private savings accounts for retirement. Root out the massive fraud in the current SS disability system. Cut SS taxes gradually back and eventually make the system voluntary.

And we are sure that all liberals and Democrats will volunteer to stay in the new SS system. Just like those school teachers in 14 states?

Yeah, right… Liberals will be the first to head for the exits. They love their money more than anyone.

But watch out because the same liberals who created this SS monster have a plan. No, they do not want the conservative solutions that would solve a large part of the problem. That would be too easy.

No, they will “solve” the SS crisis they way they always have. They will say, “All these baby boomers worked so hard and paid so much into Social Security, that we must give them a good payback.” So the liberal plan is to DOUBLE Social Security taxes to 25% of the average paycheck over the next 20 years, so that your children and grandchildren will be broke from all their taxes before they even get their paycheck.

Don’t believe it?

Well, already the system takes 6.2 times as much as it did at the beginning. And liberals already have floated the idea of doubling the current tax, and will do so without a second thought. And finally everyone will end up poor except the super rich like Warren Buffet and Tom Hanks and all those Democrat government workers and public school teachers who will be given the option of private retirement funds.

This is classic socialism. Impoverish everyone except the Friends of the Democrat Party. And finally, we will have the desired outcome of socialism – everyone will be the same. Everyone will be poor.