My Opinion
Privatizing the politics' sacred cow will benefit society

"No damn politician is going to scrap my Social Security system."

Franklin D. Roosevelt, when he said those words, had no idea just how much of a political monster he had created. Social Security is the sacred cow of American politics. With the American Association of Retired Persons guarding against any kind of reform, the system threatens to bankrupt the government in the not-too-distant future. Dismantling the current system by privatizing would benefit pensioners and the economy.

When the baby boomers retire, younger workers born after 1965 will be forced to support them under the current system. The burden on the young will be too much to bear. The ratio of workers (those paying taxes) to retired beneficiaries (those receiving payments) will drop from 3-to-1 in 1995 down to 1.9-to-1 in 2030. The crisis may be 30 years away, but it looms large as an economic and political disaster if reform is not carried out. The strain will cause government to either cut benefits for the baby boomers or skyrocket tax rates on those born after 1965. The government could also print more money, or borrow like hell (politically the best answer in the short run). Imagine 33 percent of the U.S. population collecting benefits from a shrinking work force.

The Social Security system was designed to eliminate poverty among the elderly. The system was not designed to support people who retire at 65 and live into their late 80s. As people live longer and stay healthier into their old age, many analysts suggest raising the retirement age to 70. In 1995 a 60-year-old is more likely to be as healthy as a 1955 50-year-old. So, make the hippies work longer. Once again, however, this answer comes at the expense of those born after 1965, for there will not be as many job openings. For those in the twentysomething crowd Social Security will be a raw deal.

Not only will the Social Security system suck tax dollars out of Generation X, but it will stagnate the economy as well. The U.S. savings rate is among the lowest of industrialized nations and is a danger to future economic growth. A factor in this low savings rate is our collective dependence on the government in the form of the Social Security system. We view Social Security as a savings plan when it actually is another blank check for politicians.

There is no giant bank account and no "trust fund." It is a political gimmick for any politician to speak of a trust fund. All Social Security revenues go into general revenues and are spent to the last dollar. Although Social Security has had a massive surplus, no accumulation of Social Security taxes exist. Congress wanted the surplus funds to cover the actual budget deficit, which would be $58 billion higher if Social Security were a separate entity outside the reach of a money-hungry Congress.

As FDR had hoped, politicians who dare touch his program will quickly find that they have committed political suicide. So, politicians will defend a system that they know is dishonest and in jeopardy. Capitol Hill Democrats recently defended Social Security as a safety net for the middle class. Today an average earner will actually receive less benefits than those taxes paid into the system. Even the most conservative investments on the private market bring a much higher return than those made in our Social Security system. We need an honest system.

Social Security has become a wealth redistribution system that is not benefitting our society. Clinton raised the taxable benefits from Social Security to 85 percent. If the system is designed to benefit the elderly poor, then let the wealthy and the middle class out of the system, and make Social Security voluntary. Let the marketplace, with its higher rate of return, take care of most of us and let our taxes take care of the poor in a more direct way. Poverty among the elderly has declined, but it has not disappeared. Elderly widows are growing in number and are becoming worse off under the present system.

Privatizing Social Security will give people the economic freedom to invest their money in the way they see fit. The employee could decide how much risk is acceptable, making a privatized system similar to other private pension accounts. The employee would know for sure that an account is being kept and would know exactly how much he or she could gain. More importantly, dismantling the Social Security System would free up capital and strengthen our economy by creating a higher savings rate.

Our lack of real wage growth, which has resulted in lower Social Security revenues, is in part caused by Social Security itself. If politicians still worry about people not being smart enough to save for retirement, a system of mandatory IRAs could be enacted. This would still leave Americans free to choose how to invest their money. A privatized system will result in higher economic growth and higher tax revenues in the long run.

Americans will want to spend to ensure that the poor will be cared for in their old age. Americans also want to be told the cost honestly -- not in a system that hides the bill.