Driving A Stake Through Social Security...
And it does need to be killed, permanently.
The debate, as far as I can tell, revolves around three important premises that are consistently and unsurprisingly, unmentioned:
1. If this was a program invented by an Italian, the government would prosecute him with a RICO statute.
2. Pay-as-you-go no longer works when there ain't that many people left to pay.
3. All things eventually wear out or become obsolete. This is no exception.
The major stumbling blocks seem to revolve around the the issues of Republicans trying to tapdance around a program to which a great number of people have an emotional attachment , a population which despite the enormous number of financial programs on TV and which is supposed to be the "investor class" remains truly ignorant of economics. Your final obstacle is not being able (at this time) to just say, "Hey, it needs to go away because it doesn't work" because that would completely freak people out. So instead, you use the word "reform". Reform only works when applied to a system that already works and which can be saved. This one doesn't work and can't be saved anymore.
For democrats, the emotional attachment is even worse; this is not just any 'ol program, this is the Crown Jewel of the New Deal. This is the icon in the liberal temple. It's the Holy Grail, the Ark of the Covenant and the Ten Commandments rolled into one. Saving FDR's legacy near on 70 years after his demise is somehow still important. There's also the issue of keeping a huge (and unionized) bureaucracy in place. Democrats have never met a bureacracy they didn't like. There's also the attempt to keep the issue alive until 2008, or at least until 2006, so that they can continue to scare the bejesus out of people in order to glean votes.
Of course, what neither party will tell you, is that the issue involves a very delicate and serious sub-issue: it involves not being able to raid the Social Security....ahem..."Trust Fund" in order to pay for military cranberry research in Massachusetts or to name another stretch of highway after Ronald Reagan. I'm also thinking that because the ...ahem...Trust Fund is mostly I.O.U.'s in the form of Treasury Bonds, what the wholesale conversion of those bonds might actually mean to the U.S. economy.
So, if we could dispense with the bullshit, smoke and mirrors for a few minutes, here's an interesting idea:
Say the Fed'ral Gub'mint was to stop collecting Social security taxes on an arbitrary date. Let's pick April 15, 2010. That'll be the day when most Americans file their tax returns. As of midnight on April 15, not one more penny of Social Security taxes will be collected in any way, shape or form. Now, we look at who has paid what into the system.
If you are 55 or younger, you should get back whatever it is you paid into the system (sans interest), in cash, and probably over a period of five to seven years. You will be issued checks, which can only be used specifically to fund a retirement program. You can't use it to buy a home, pay bills, get a new car, or buy grandma a new iron lung. It MUST be used for a retirement account (mutual fund, 401K, IRA, etc). This account, set up specifically for retirement, would be tax exempt.
If you are older than 55, you will receive what you would have gotten anyway from the money that's left over in the...ahem...Trust Fund, guarenteed by the government if there's a shortfall. This too should be tax free. The problem with this portion is what to do if there is shortfall. The answer: government spending must be reined in in some other area, preferably non-defense.
To continue to fund the system until everyone has been paid off, we'll have to raise the retirement age to 67. No way around it. But, since many employers like to ditch employees before they reach 67 (because of pension payments), stricter enforcement of anti-age discrimination laws must be the rule. We then eliminate the 25/75 rule. This rule states that if you have 25 years of service with the same employer, you can retire on a 75% pension. The problem with this fantastic loophole is this: what happens when you started working for your company at the age of 20, retire at 45, and then have to wait until mandatory retirement age for your Social Security payments? Eliminate the rule and this problem disappears.
Another issue; what to do with your private acount should you die prior to reaching retirement age? Well, since the government no longer has your money, you should be able to pass it on to those who survive you, free of inheritance tax, no less. You'll notice I keep saying "tax free" here. There's a simple reason: when you lower or eliminate the tax liability on an investment, people tend to do more investing. Investing reaps dividends far in excess of whatever taxes were cut. It's a proven proposition. In fact, the amount of money the Fed'ral Gub'mint steals would probably exceed the amount needed to actually run our mythical, stripped-down gub'mint. This used to be called "Voodoo Economics" but past experience in the 80's and 90's shows that it does, in fact, work.
We're also hearing a lot about "transition costs". What transition costs? The program should be self-liquidating and cost nothing. When we speak of transition costs what were really talking about is what the government used to skim off the top anyways. If we wish to keep the grubby hands of yer local congresscritter off what is supposed to be designated Social Security money, then pass a bill that takes Social Security off budget, and we can stop the fancy accountant's schemes that use that money to patch the holes in the budget process.