Social Security Reform

Reform of the Current Social Security System is planned.. the worst system except for all others? Well the misuse of opinion polls could have led some to this conclusion. This reform issue is a political minefield. George W. Bush realizes it. The scare mongerers have started with, 'you have no legal rights to Social Security' so you may as well gamble it on the stock market? That's not good logic.

The Bush Plan might be seen cynically as.. Gaming the System and Bailing Out the Stock Market Losers? You will get to manage an individual superannuation 'share portfolio.' You'd better do good. So the question of insurance or fund protection arises. Because ownership with no insurance discourages entrepreneurial risk taking.

The reform idea is really based on an assumption: Individuals make better investment decisions than government. And that this requires separation of government (Social Security) from the self-interest-driven stock market. This gives people more choice and reduces the level of government. The magic of compound interest grows the individual's retirement nest egg.

So lets flood trillions on to Wall Street and let’s all get rich in the Stock Market - but do the numbers add up? Does this work? The analogy that what is good for an individual is good for everyone as a whole. There are questions of equity or fairness here, too: There is also another problem with inheritability and requiring everyone to buy an annuity at 65. Throw yourself from the train at 64 and your family can inherit. If you 'time it right.' By dying a few days earlier, you could give your family a few extra hundred thousand dollars. It does sound cynical. But there IS a rather strong incentive to die before you are 65. In this reform proposal.

Buying an annuity at age 65. Suppose you were sick when you retire at 65, and the doctor told you five years was the most you had to live. Would you still buy an annuity? Or would you depart this mortal coil? Hmm. Let me think. I would live off my savings for five years and then leave the rest to my family. Gain immortality.

The general problem is: If we don’t require people to buy annuities when they reach 65 and retire, many people will outlive their existing savings – and public welfare, Social Security, will end up paying.

Group differences. Most African Americans die sooner after retirement and receive less money after retirement than a similar white person who made the same Social Security contributions while working. But African Americans benefit from the slight progressiveness of Social Security and benefit from disability and survivorship benefits. These are simply statistical facts that relate to urban lifestyles and to welfare system functions. As provided for in federal laws.

Private insurance companies will possibly, on average provide African Americans with larger monthly payments, since on average African Americans will collect fewer payments by dying faster, which brings up a very good point: When people retire at age 65, they have to buy an annuity to receive monthly payments the rest of their lives.

There is another cost to privatization of Social Security retirement benefits – which could informally be called 'the cost of risk' – which privateers have largely ignored, but the financial risk is the most vocally expressed complaint about privatization of the fund. And if we switch to a private system, we have to pay off all the current people who have contributed to the old system and save for our own retirement. We will continue to owe every 65 year old in transition costs.. Most privatization plans will borrow trillions for the changeover, the transition - to avoid paying double.

Summary: George W. Bush plans reform of the Current Social Security superannuation system. If you and our generation pay double, the government will no longer have to pay the next generation and that saves the government from declaring the Social Security shortfall as a bankruptsy type of situation. Three trillion dollars shortfall I believe!

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