Social Security

Social Security is in financial trouble.  It may not be able to pay for the promised benefits.  These benefits only pay a maximum of $17,000 per year and expire when you die.  We can do better.

Here is my answer to reform social  secutity while maintaining current benefits.  Under my proposal you will get 100% pension and free medical insurance.    The following is a proposed bill to be introduced to Congress.  Please read and give me your comments.

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Social Security Investment Trust Act of 2012

Summary:

Social Security, Medicare, Workers’ Compensation, and Workers’ Unemployment Benefits are currently being paid for by taxes on workers, employers, self-employed persons, the Social Security trust fund and general funds. Benefits are increasingly becoming greater than the taxes collected, causing the government to borrow money to fund the deficit. Some nations in Europe and, in fact, the USA are having financial problems caused by this deficit.

This Act will divert all the taxes collected to a new Social Security Investment Trust Fund to be invested in American Business. Each worker will have a share of the Trust in proportion to his/her investment in it and will receive funds from his/her share for retirement, health care insurance, and unemployment. The tax collections will be unchanged. People who are retired will continue with the present plans unchanged. The Coinage Act of 2012 may be used to raise revenues to pay for the Social Security Investment Trust Act and should be viewed as part of this package.

The expected effect

Approximately one trillion dollars per year will be invested in American business, greatly improving the economy and income tax revenues. Investment Trust Fund benefits will gradually replace the current program benefits. It is expected that the budget will balance within seven years and benefits will be greatly increased. Most workers will retire millionaires, and these funds will be fully vested so that they may be part of the worker’s estate. Retirement benefits, medical care benefits, and unemployment benefits will be paid for by the worker’s account in the trust. The transition should be essentially complete within one generation.

The Act

The Social Security Investment Trust Act (herein after referred to as the TRUST) requires that all money deducted from employment salaries and all money provided by employers to Governments on behalf of their employees and all money provided by self-employment taxes (herein after referred to as the WORKERS) be invested in a new Social Security Investment Trust on behalf of each employee (herein after referred to as the FUNDS). INCOME TAXES are not part of this plan and will continue unchanged. The FUNDS will be the property of the WORKERS in proportion to their investment in the FUND, and each WORKER will have an account showing his/her shares in the TRUST and the value of his/her investment. WORKER’S benefits will be paid by the WORKER’S account in the TRUST.

The FUNDS will be invested in USA-based business and USA subsidiaries of foreign business to provide jobs and economic growth for US. No funds will be invested in government securities of any nation or infrastructure of any nation. Investment managers will be chosen from a national pool of professional wealth managers (herein after referred to as the MANAGERS) with no MANAGER having a greater share than TBD percent of the FUNDS. MANAGERS may not contribute to any political candidate’s campaign funds.

The FUNDS may be used for health insurance of workers, unemployment benefits of workers, and the workers’ retirement benefits. If benefit payments are less than current programs, all current programs will remain in effect as a minimum payment to workers with the current programs making up the shortage difference. The worker’s funds are his/hers and will be part to the worker’s estate if any remains.

END OF ACT

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FAQ’s:

Q: How will this act affect current entitlement program benefits for Social Security, Medicare, and Unemployment?

A: Current program benefits will not be changed by this Act until the worker can pay for them from his/her account in the Trusts. The Worker will receive current benefits or better.

Q: Why the requirement not to invest in Government securities and infrastructure projects?

A: This has been greatly abused by current plans that loan the money to governments at low or no interest amounting to another tax. Politicians like to build infrastructure projects for political purposes that make little economic benefit.

Q: How will we pay for the current benefits if all the revenue goes into the Trust?

A: This program will improve the economy, creating more government revenues from other tax sources such as Income Tax. The budget is projected to be in balance in seven years. Also, the Coinage Act of 2012 may be used to help pay the current benefits.

Q: This sounds too good to be true. How do we know the investment projections will be achieved?

A: This bill shows the difference between the current pay-go welfare transfer payment programs which have no investment return and conservatively-managed investment programs. Albert Einstein called compound interest the eighth wonder of the world. The projections assume a real rate of return of only 5%. Over a 40-year period, the value of the investment increases by 300%. For example, workers making $50,000 for 40 years will contribute $245,000 which will grow to $1,000,000 at 5% which could be used to pay out $50,000 / year with no draw down and leave the $1,000,000 in the worker’s estate. Compare that to the current defined-benefit plan of Social Security which only pays $18,000 / year and ends at the worker’s death with no money for heirs.

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11 thoughts on “Social Security

  1. Social Security should go the way of the dinosaur. The majority of the people don’t know how the Social Security was formed or by who. This program is the product by the Democratic Party under President Franklin D. Roosevelt during the great depression. The Social Security program was meant to help widows and orphans when life handed out tragedy, now look at this monster. Many of the community leaders and many states at the time rejected the concept but like many Democratic “Socialist” that controlled Congress at the time pushed this program down the throats of the people, just like Obama Care. I don’t agree with Mr. Postma on this point of forcing people to invest in money market programs, bonds or stocks, I do however believe people should save and invest for their future and it should by control by that persons, and who said we have to retire from the work force.

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  5. You actually make it seem so easy with your presentation but I find this topic to be actually something which I think I would never understand. It seems too complicated and very broad for me. I’m looking forward for your next post, I will try to get the hang of it!

    • Economics is complicated which is why there are PhDs in it. Free market capitalism works as witness the USA and socialism fails as witness Mao Tse Tung and his Great Leap Forward which killed 45 million prersons. However according to Nial Ferguson professor of economics history at Harvard in his four part series the Ascent of Money, politicians have learned that they can get elected advocating socialism.

      So I use the KISS technique with sayings like 100% pension and free medical insurance. It gets peoples attention, creates interest, and generates questions and understanding.

  6. It is probably one of the most important issues on your Pierce County area ballot, the request to Approve Pierce County Charter Amendment # 40.
    This amendment when approved, will make it harder to raise taxes in the future by requiring a 2/3 majority (5 votes) instead of the current requirement of a simple majority (4 votes) for all potential future tax increase that are the purview of the Pierce County council. To raise tax rates should be only done if their is a compelling requirement, so let’s make it tougher to raise taxes. All five Republicans on the Pierce County Council voted to put this amendment on the ballot (It passed 5 – 2).

    Also, when you vote and then mail in your ballot, within a few days your name is then subtracted on the mailing and calling list of most candidates. So, a great way to stop all that campaign mail and phone calls is to vote within a day or two of getting your ballot and mailing or getting it to a drop box. Most candidates will be receiving a daily list of those who have not yet voted and will continue to mail and call for support.

    from Dick Muri

  7. Mr. Postma,

    How can you just assure everyone that there will be a steady 5% compound interest rate, given that all of the residual money in each person’s “fund’s” will be transferred to their estate when they die?

    • The 5% assumption is conservative based on financial data from 200 years. Most projections for funds of this type are higher. Warren Buffets company Berkshire Hathaway was $775 in 1979 and now is $133,841 per share. Most institutional funds expect 7% such as the Washington State Employees fund. The 5% is not guaranteed and will vary. This is a defined contribution plan (your payroll tax deductions) and your benefits are variable.

      The money belongs to each worker and is for their benefit and does not affect other workers or the fund. The size of the fund will change based on workers contributions and withdrawals but will not affect the rate of return.

      Hope this helps.

  8. Stop paying none US citizens to live here, stop paying there medical,giving them a place to live ,send them back to where they come from; unless they they are willling to learn and speak english. Dont make the US citizens learn spaNISH ETC… TO COMMUNICATE WITH THEM. it all cost us daily. This is costing us billions of dollars aday.

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