Recent Social Security Proposal

[lehighguy]

Recently a bipartisan group introduced a new social security reform. It is essenially the same as the "lockbox" program Al Gore desribed in his 2000 campaign. Here are the take-aways:

1) Benefits are not cut, the retirement age is not raised.
2) There are no private accounts involved at all.
3) The SS trust fund would remain invested in tresuary bonds, no stock market.
4) The real change is that instead of using the SS trust fund to finance current spending, it would be used to purchase treasury bonds on the open-market. These treasury bonds would have real value, as opposed to the "special" treasury bonds that are currently issued and have no value. Essentially, the trust fund would be a real trust fund (sort-of).

To explain the above statement, I need to give a brief review in SS accounting. Essentially, the government takes in $X in SS tax revenue and pays out $Y in benefits. For the moment X > Y.

Now how does this effect the budget? We run a deficiet of $400Bln according to the treasury department. In reality, we run a deficiet of $600Bln, but use the extra $200Bln ($X-$Y) to bring down the debt. However, this is a false accounting entry. That $200Bln was supposed to go into the SS trust fund. We have to pay it of in 2017 when people retire. Why are we reporting a deficiet of $400Bln when the real deficiet is $600Bln? Because politicians want to mask the true cost of SS for political gain.

If spending isn't reduced the plan will do nothing for solvency. We would need to adopt the change and then reduce spending to the old deficiet level. In other words, all the plan really does is show the American people the true cost of SS. I have no doubt they will have no clue wether $400Bln versus $600Bln means anything, nor do I think it will change thier spending habits. But at least we will have been honest with them about what is going on. After all of the corporate scandals of the last few years its amazing that we allow the government to blantently cook the books right in front of our eyes.

So why am I all wrapped up over this. Because I was reading the paper today and there was a full page add from the AARP regarding the plan. It used the words PRIVATE is giant bold 100 size font to explain why people should oppose it. It criticized it for increasing the debt and not solving solvency. This is puzzling. First of all, no private accounts are in the proposal AT ALL. Second, it doesn't really increase the debt. The debt is already $600Bln, we just lie about it and say its $400Bln. Lying doesn't reduce the debt, and being honest about it doesn't increase it. It's also amazing the AARP can afford to take out full page adds in national newspapers considering the plan has NO effect on current or future retirees. All it really proposes is more honest accounting practices.

Dems also dissapoint me. This is Al Gore's plan from 2000. Why are they opposing it? Do Dems even think about issues anymore or do they inflexively oppose everything?