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Clear Thoughts
The Social Security Debate
Originally Published Friday, March 11, 2005
| A social security crisis now? A comment on the human side of social security. |
As we all read the headlines concerning Social Security and guesses as to what year the money may run out, one thing is clear: it is over-funded this year and is not running out of funds in the next ten to twenty years. In fact the extra funds are invested in US Treasury Bonds helping to fund our real deficits. At Clear Asset Management, we are waiting on the sidelines, reading everything we can about the topic, issues and potential fixes, until a few solid proposals are formed to really weigh on the topic. The American Institute of Certified Public Accountants (AICPA) has posted a great executive summary outlining the issues and potential fixes to their website. They also link to an over 100 page document with more details, and both of these can be found at http://www.aicpa.org/members/socsec.htm.
Before you read the facts and figures, one of our writers wishes to share a strong memory from his childhood. He was friends in kindergarten with a girl who lost her father. She had her mother, and two older brothers 11 and 13 years old. Her father had a small amount of company-sponsored life insurance as an employee of the telephone company. He was one of those classic blue collar guys climbing poles for a living, enjoying life and his family. He was living the American dream having his children go to a good public school in the suburbs of New York City, buying a house. However, a brain tumor swiftly took his life.
Her mother went to work immediately. She got a good administrative job at a school. Clearly though, she could not continue to pay the mortgage and provide all the funds necessary for the family.
Let's fast forward to today some 40 years later. All three kids are hard workers in "mid-level" jobs that pay well enough to raise them slightly up the ladder from where their father's life could bring them. They pay taxes and own homes. Only one went to collage, which means the other two have been working since they were 18. All three are certainly productive members of our society.
Let's jump back to when our writer's friend was five. Her mother could not buy food and clothes and pay the mortgage and taxes on her single paycheck. And she was not eligible for any government help. As Seinfeld's George Costanza once said, "We are supposed to be living in a society here, and act accordingly." Although the government was evidently not interested in helping my friend's mother, it was interested in helping the three kids. Each child got a monthly check until they were 18. These checks provided the difference that allowed them to remain in their house, in our school and grow up to be "respectable tax payers" for our government.
What was the total investment made in these three children by the U.S. Government and its tax payers? And what has been the payback to date? What will their total payback be by their retirement? And, on a different note, what will they eventually receive in retirement?
This is not a bleeding heart story. This is real life. This is America doing the right thing. We are publishing this today to challenge our lawmakers who claim they are "fiscally conservative and socially aware" to think real hard on this one. The taxpayer's investment in this family reaped great rewards for the family, society and for the government's coffers.
Whatever the final fix is for social security, we urge our investors to remind their senators and congressmen that it is more than a government sponsored 401k plan that needs a self-directed asset allocation plan. We know its original intent was not to be the sole source of retirement income for most Americans, and we firmly believe it should not. That thought stated, the government must keep enough solvency in this system to truly provide its namesake: social security.
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