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TMF Pixy's passion displayed in his May 15 article on Social Security reform is to be applauded. Some of us nice older gentlemen can still get our hackles up when provoked and Mr. Pixy has certainly gone "ranting at the TV" two or three better.

He provides some important facts and prevailing opinions on Social Security and particularly in revealing the patronizing attitude in Washington on this issue. I agree with TMF Pixy that the system is in trouble and will eventually run out of funds if its problems are not addressed. Unfortunately, I like the Pixy, do not have a practical, politically appealing answer ( although in my younger days I do remember having a solution to this and just about all other problems).

Having said this, I do judge that the system must eventually be phased out in favor of voluntary contributions for investments for retirement and disability and life insurance. Convincing the voting public of this need will take a major effort that would need to provide information to them on the current system to compare with private and competing investment options. The problem of improvident or incapable savers/contributors would be handled as a separate issue of family obligation, private charity and /or public welfare.

I believe two posts, one by ejclason explaining how the system really works and the other by resimer, replying that the system described by ejclason sounds like a Ponzi scheme, were essentially correct and point to the dilemma we now face in attempting to fixed it. Social Security does meet the definition of an investment trust, but is sold as one by the politicians to make it more palatable to the voters; it is not insurance, since it is not funded with a reserve to meet future obligations; it is not welfare, because the politicians in Washington know that that label has a negative appeal to voters and thus have made sure that every one pays in and receives back.

So what definition best fits the system? In my view it would be a means of redistributing wealth that includes some patronizing guidance from Washington to our citizens for saving for retirement/disability and utilizes the Ponzi principal. Unfortunately our politicians have seen to it that the voters are so dependent on the system that this Ponzi scheme will not be allowed to fall from its own weight. The system must be continuously subsidized and funded thus making transitions to other systems, or out of the system, very difficult.

If the current Presidential race can initiate a rational discussion of what Social Security really is and its potential problems and inefficiencies, perhaps it can provide a forum for looking at ways of fixing the problem. Unfortunately, political debates do not normally invoke rational discussions.

The poster, ejclason, suggests the most frequently proposed solutions for fixing Social Security, i.e. extending the retirement age, removing the income cap for paying into the system and using an inflation deflator. While I disagree with these "fixes", if I were betting man, I would bet they will makeup the majority of any near term "solution". This "solution" does not, in my mind, fix the problem of individual choice of how and what to save or pay for insurance premiums, nor the current inefficiencies in the non-competing system, nor the fact that Congress can use these "new funds" as they have in the past to finance new benefits or divert them to pay for other programs. What it does do is concentrate even more power over our fates into the hands of Washington politicians. It also allows the system to continue to reward now and pay later.

The Libertarian solution from Harry Browne is to sell Federal assets such as lands and parks to private parties to fund annuities for individuals over 50 as part of a phase out of the Social Security system. While this proposal has appeal to us of the Libertarian bent, it would take a tremendous educational effort to convince the voters - more than the Libertarians can provide if they continue to insist on running for political office and diluting the educational efforts.

The poster, r2d2t2, suggests that Social Security payments be means tested for income in retirement. He used $100,000 as an upper limit for collecting Social Security. I like this approach, only I would tie the limit to the fingfool index which equals $1 above fingfool's current retirement income. I seriously do, however, believe this may be the starting point for Social Security reform. R2d2t2 stated in his post that some on this board believe Social Security is welfare (I'm not sure he does) and indicates that as such why not means test it. Whether we call it a tax or welfare, I agree.

Boards such as this one provide a reasonable forum for discussing and comparing ideas on these important issues.


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