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Author: xactly Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75339  
Subject: Re. Part 4, Fixing SS Date: 10/23/1998 5:29 AM
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A. Levit has some amusing ideas about how to fix SS, particularly in investing the SS funds more aggressively, so they grow fast enough to support the upcoming Baby Boom retirement tidal wave.

1. The fact is, there aren't really any "funds" to invest more aggressively, as Al noted earlier in his discussion about SS being a "pay in funds, transfer funds to current retirees" sort of system. So there is no large stash of money, waiting to be invested more aggressively. -- and with our government's tendency to overspend, there's not much chance Uncle Sam will be able to repay the SS fund for all the IOUs any time soon.

2. And as Al also said, even the current SS surplus is not sitting in some nice investments, growing away -- the surplus is being used to balance the budget, with nice litle IOUs from Uncle going into the empty SS cookie jar. So any future investing to stabilize the non-existent fund would have to come from the partial worker contribution that could be made available for more agressive investments. The problem with this is, you'd have a lot of 50+ year old folks being told that their defined SS benefit would be reduced -- so what are the chances that they'd invest aggresively this close to their retirement?

3. Then there's the proposal to fix SS by eliminating the salary ceiling and have higher paid workers pay in a percent of their full wages (because it's only fair for better paid workers to pay the same percent of their full salary as other workers,) Well, you see, there's also this ceiling on how much SS pays retirees, so the higher paid workers get a reduced percent of their wages replaced by SS -- which makes the wage ceiling be a sort of fairness mechanism itself.

4. Another proposal to fix the fund by eliminating benefits for well-off retirees is interesting, because to do this, the government would have to abandon its premise that SS isn't really a tax, it's just a mandatory retirement fund.... If SS were indeed positioned as a pure tax, maybe there might be an opportunity for real SS reform, given our nation's historic distaste for taxation without representation...

5. If the reforming of SS were to be done on the basis of fairness, we should look seriously into the idea of raising the eligibility age for getting SS. When SS began, the average retiree didn't live long enough to collect SS -- average lifespan was less than 65 years. That made SS largely a fund for widows and orphans. Over the years improvements in health care, diet, workplace safety, etc. have increased average lifespan to a decade or more beyond SS eligibility -- but the eligibility age has only been changed one time. We should look into a process for continually raising the eligiibility age to correspond with increases in average longevity.

6. The key to really fixing the SS system is not even addressed in this series of articles: how to keep the government from raiding ths SS funds to cover up their bloated budgets and deficit spending. Let's face it, even if people want to "do the right thing" and agree to pay up more money to preserve SS, no one wants to pay more money into the current SS system than they do now because no one believes the government can be trusted around a bigger pile of money. If people pony up more to save SS, the fund should not be in government hands.

7. Oh yes, one more point: government employees, particularly retired Senators, Representatives and Presidents should all have their reitrements indexed to the fate of SS. If SSbenefits are slashd for future retirees or if SS gets limited for wealthy retirees, wealthy government folks should have their pensions slashed as well, esp. as they were responsible for the fund raids and fiscal imprudence that allowed SS to get into this mess in the first place!
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