The Coming Social Security Crash

Gary Polland posted this article today on his Texas Conservative Review newsletter. Social Security is a pyramid scheme that will come crashing down in the near future. The Democrats solution, according to sound bites from Hillary and Obama, is to raise the capital gains tax and to tax all IRA and mutual funds investments and apply that tax to "shore up Social Security." The coming Social Security collapse is one of the biggest problem facing my generation of Americans. In essence, Americans collecting Social Security are going to bankrupt the taxpayers in the same way that retired labor union workers have bankrupted the big three American automakers.

For years (decades?) conservatives have been saying there is no Social
Security trust fund: that in essence it is a government Ponzi scheme, and now
unfortunately we are being proven right.

Allan Sloan, in the March 31, 2008 edition of Fortune says the real trouble will begin in 2016-17. You may recall the conservative complaints: that essentially money comes in and is paid out immediately for current retirees benefits and the "surplus" is borrowed by the government to spend on other bills. The government in return issues treasury securities. Sloan described the catch; "say that Social Security calls the treasury ... on 2017 ... to cash in $20 billion of securities to cover benefit
checks." The treasury can get the money three ways, spend $20 billion less,
raise taxes by $20 billion or borrow $20 billion. The choice is essentially no
different than if there wasn't a trust program.

So the train wreck is coming as more and more of the U.S. budget is
going for retirement benefits. One way to slow judgment day will be to divert
the surplus from Treasuries to the "equivalent of a sovereign wealth fund", but
that will affect the present "borrowing" of the Social Security surplus. Other
unpleasant options: raise taxes, means testing, reducing benefits, and raising
the retirement age. Maybe the idea of partial individually owned and controlled
Social Security accounts makes some sense, given the alternatives.