Social Security Facts - #8:

TRUST FUND!

It has become clear to me that until you understand clearly that there is no money and there is no trust fund, it is going to be very difficult to understand Social Security or any proposals that are brought to our attention, including mine!

I suggest that people analyze the Social Security from the outside, instead of getting into the inside detail. "China buys Treasury Bonds, therefore, the Social Security Trust Fund buying Treasury Bonds is the same - an investment with a return." "Corporate Bonds are sold every day to people who want an investment with a return." Why is the Social Security Trust Fund different?

Let's get inside the system to understand the truth:

1. When China buys Treasury Bonds they buy them with excess funds they have and feel because our country is a solid investment, know that they will be able to redeem them with a reasonable return. The Government takes this money and spends it, reflecting a debt on the books which will be paid out of future income (taxes).

2. When Social Security buys Treasury Bonds NO MONEY CHANGES HANDS. We are Social Security! We are the Government! Our taxes are simply called a "Treasury Bond" to mislead us into thinking it is an asset. (We do not show them as a debt because of this!).

A look at Corporate Bonds is also instructive:

1. Corporate Bonds are sold to Investors when corportions require extra cash and are redeemable over a period of time at an attractive rate from the profits of the company. Very similar situation to China buying Treasury Bonds.

2. Would it make sense for the Corporation who periodically issues Corporate Bonds to set up an office - "Corporate Security" - take the profits through this office as they come in - issue itself a Corporate Bond with a return - to be paid out of future Corporate profits? And refer to it as an asset?

Please think about it and comment. It is important to "follow the money!"

Social Security Facts - #7:

NOW THAT I HAVE CONVINCED YOU THAT:

• SS is simply a TRANSFER of WEALTH from the YOUNG to the OLD
• There is NO MONEY! TRUST FUNDS, ETC. are ACCOUNTING GAMES
• SS is a NECESSARY WELFARE program
• Talk of RETURNS and YOUR ACCOUNT are only for effect!
• SS is hard to FIX because of MASSIVE excesses for our GOVERNMENT!
• PERSONAL ACCOUNTS will be the LEADING EDGE of REFORM!

In addition to PERSONAL ACCOUNTS and HONESTY in ACCOUNTING (Income) we must also reform the DISTRIBUTION RULES (Outgo)!

FIRST: MEANS TESTING!

There is NO reason a person of adequate means should receive SS on top of their adequate personal assets or income! Remember: it was meant to be SUPPLEMENTAL!

Social Security Facts - #6:

Let's look at some numbers for 2004:

OASI-this is what is normally referred to as Social Security:

Assets (end of 2003) $1,355.3 billion
Income during 2004 $ 566.3 billion - payroll taxes
Outgo during 2004 $ 421.0 billion - SS payments and admin
Net increase in assets $ 145.3 billion - extra
Assets (end of 2004) $1,500.6 billion - total "bonds"

Note:

1. Excess payroll taxes (WHY DO THESE EVEN EXIST?) amount to an additional $145.3 billion (WITH A "B") for Congress to spend each year - and they don't have to talk us into paying real taxes for these expenditures. Any wonder the hesitation to touch SS?

2. The "Trust Fund" has taken $1.5 trillion (WITH A "T") out of the economy in the past - looking at the rate of increase in 2004, most of this must have come out over the last decade or two. What would that have done for our economy?

3. If we put 1/2 of deductions into personal accounts, that will add $283.15 billion directly into our economy.

4. The $137.85 billion shortfall in Outgo ($421.0 minus $283.15) would at least become part of our debt, instead of being hidden as it now is.

THIS ALL SEEMS POSITIVE TO ME!

Social Security Facts - #5:

PERSONAL ACCOUNTS are the appropriate way to ease the future CRISIS (yes, CRISIS, everyone will agree there is a crisis coming - it is only a question of when).

Let people put a part of their deductions into PERSONAL ACCOUNTS (I like 1/2, the 6.2% that we all put in from our paycheck) and REDUCE the future committments on the Government. Phase it in over the next 5 DECADES, with all people under 55 years participating, so that Government payments would be reduced proportionately until the 20 year olds of today get 1/2 of what would have been the Government portion when they retire and they are responsible for the other 1/2 (or 1/2+ if history holds true - a win-win for all!).

Then we would all understand that the Social Security Program is simply a welfare program for the elderly to which we all contribute 6.2% of our income, and guarantees a minimum income - 1/2 of what it is today. That is what it was meant to be - a SUPPLEMENTAL INCOME to insure survival in retirement. It has the advantage of putting the responsibility back where it belongs - with the PEOPLE!

Social Security Facts - #4:

There is no RETURN (interest, yield, etc.) on the money they take for Social Security for two reasons:

1. There is no MONEY (see Social Security Facts - #2), so there can be NO RETURN!

and

2. If you die before age 62 you get NOTHING - neither your capital or return - and if you live to be 100 you get a HUNDREDS OF PERCENT RETURN! Thus, talking about a RETURN on the Social Security Trust Fund is specious, discussed only to make you feel good!

PERSONAL ACCOUNTS are a beginning to fixing the misconceptions of Social Security!

Social Security Facts - #3:

Social Security is WELFARE - plain and simple!

A WELFARE I fully support, by the way! But our society cannot make valid decisions if we continue to be fed falsities - TRUST FUNDS, RETURNS ON THE TRUST FUND, LOCK BOXES, TREASURY BONDS, ETC., ETC., ETC., that do not exist!

ACCOUNTING GAMES to satisfy the society are a disservice to acheiving our goal. Let's hear the truth!

Social Security Facts - #2:

There is no Trust Fund, Lock Box, ETC., in fact, there is NO MONEY!

The Social Security TAX on the young (workers) is simply sent out at the same time you pay it to the old (retirees).

Any EXCESS is used for other GOVERNMENT EXPENDITURES - or -

ADDITIONAL TAXES are REQUIRED if there is a SHORTAGE!

Everything else you hear is simply ACCOUNTING GAMES to support POLITICAL POSTURING!

Social Security Facts - #1:

Social Security is simply a transfer of wealth from the young (workers) to the old (retirees).

Everything else you hear about Social Security is posturing!

A UNIVERSITY ELITIST AND "PHYSICAL RELATIVISM"...

I sometimes listen to the Alan Colmes radio show in the evening while smoking my pipe on our deck - trying to make sure I understand the enemy, so to speak!

Friday night I heard the dumbest comment I have ever heard from some professor at Case Western University who was discussing the steroid controversy with a replacement host. I was so upset when I heard this that I failed to write down either the professors name or the hosts name. The professor was defending the use of steroids in principle as follows (I paraphrase):

• Take the superior athletes who have physical advantages due to genetic makeup, they do nothing to develop this superiority. Therefore, someone who doesn't have these advantages, is well within his rights to take steroids so he doesn't have to do anything to develop better skills.

I almost couldn't believe what I heard! Physical Relativism! You work hard to become a great hitter like Babe Ruth and your genes don't quite allow you to achieve that goal, just stuff some steroids into your body. It's OK - the Babe just had a few more good genes than you and that isn't fair because he didn't have to work for them!

We had better all note a pattern from these university elitists: I talked to my grandaughter last night and asked her how her grades were. Her answer: "We don't get grades!" This is the same thought process: do anything to make all equal since someone being better hurts someone elses feeling. "Make all equal" is the operative phrase and we had better start recognizing the elitists efforts throughout our society.

WORD FOR THE DAY: agitprop

No HINT for this one. Look it up!

TAXES...

I quote Robert Novak from a March 17, 2005, column titled "Apostasy in Indiana":

"But many other Republican leaders oppose any tax increase of any kind at any time, for one reason. It was stated for me this week by Mississippi Gov. Haley Barbour, who was deputy to Daniels in the Reagan White House. "Raising taxes," said Barbour, "is the enemy of controlled spending."" (my emphasis)

The subject was the change in philisophy of newly elected Governor Mitch Daniels of Indiana who is now proposing tax increases, after spending the majority of his career fighting this effort, most recently as W's Office of Management and Budget director.

Mr. Barbours statement cuts to the quick of our belief in cutting taxes. It is not that we object to paying our share for the benefits we get. This is a no brainer and is particularly clear in our country where the governmental benefits are so visible and adequate.

It is that if you continue raising taxes you will never stop! Why would you control spending if all you have to do is raise taxes? You might lose votes!

We all have to be realists to keep our Government in line, and allowing them unfettered access to our assets is a sure way to destroy our great society. Look around - you can see it happening! Let them have what is necessary, and hold them accountable for every expenditure. That is the way to insure our future.

WORD FOR THE DAY: apostasy

DEMOCRACY IS NOW THE REALISTIC POLICY

Victor Davis Hanson clearly and succinctly explains why W's policy "..to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world.." is the right policy for our future. It is important to understand this approach, even if you don't agree with every action!

We have tried everything else in the last century, from avoidance to the threat and use of arms, with very poor results (remember the festering Middle East and Viet Nam!). Supporting democracy in not the imposition of our preferences on others, but the proven way to avoiding future conflicts.

A valuable summary!

WORD FOR THE DAY: ubiquitous

HINT: "Making democracy ubiquitous will resolve many of the world's problems."

A FRIGHTENING VIEW...

of environmentalism by Nichloas D. Kristof in the New York Times of March 12, 2005.

In his opinion the "environmental groups are too often alarmists." "Some do great work, but others can be the left's equivalents of neocons: brimming with moral clarity and ideological zeal, but empty of nuance."

My view is that the environmentalists are in trouble because they have been brimming with nuance for decades and have led our society down the wrong path in too many instances. The neocons have no nuance for a good reason!

The most shocking throw away paragraph in the column:

"This record should teach environmentalists some humility. The problems are real, but so is the uncertainty. Environmentalists were right about DDT's threat to bald eagles, for example, but blocking all spraying in the third world has led to hundreds of thousands of deaths." (my emphasis)

Gee, only hundreds of thousands of deaths! I'm glad it was not a big mistake! Aren't we trying Saddam for about the equivalent?

I believe environmentalists should get a life and not cause any more disasters!

WORD FOR THE DAY: nuance

HINT: n. a subtle difference in or shade of meaning, feeling, color, etc. (The Oxford Dictionary and Thesaurus, 1996). This reminds of the adjective "shady" when I read it!

THE REAL REASON FOR SUPPORTING AN UP OR DOWN VOTE ON JUDICIAL NOMINEES...

Justice Antonin Scalia, who I hope will become the next Chief Justice, clearly presents the reasons for reigning in the judicial activism that is rampant in our country today in a Monday speech in Washington. An originalist, he sees no good in a "living Constitution", which the left promotes by saying it gives the society flexibility:

"If you think aficionados of a living Constitution want to bring you flexibility, think again," Scalia told an audience at the Woodrow Wilson Center, a Washington think tank. "You think the death penalty is a good idea? Persuade your fellow citizens to adopt it. You want a right to abortion? Persuade your fellow citizens and enact it. That's flexibility."

"Why in the world would you have it interpreted by nine lawyers?"

Good question! Think about it. He is telling you a critical disadvantage to ideological judges! They stop debate in its tracks! No way to run a republican style government and society.

WORD FOR THE DAY: poky

A SOCIAL SECURITY FAIRY TALE...

I have been trying to come up with a story that the people on the street of all ages could understand, allowing them to see the facade that we call Social Security. Read my fairy tale and let me know if you understand that this is story analogous to our Social Security System.

"A Social Security Fairy Tale"

"Let's pretend there is a world with a Grandfather 75 years old, a Father 55 years old, and a Grandson 35 years old and a GreatGrandson 15 years old.

10 years ago they got together and decided to supply social security to the Grandfather. So they took 12.4% of the income of the Father and Grandson and gave it to the Grandfather. But to make it easier to accept for all the families, they put it into the "Social Security Trust Fund" which gave them an IOU and then transferred the money to the Grandfather.

For 10 years all has been rosy: Grandfather, although retired, receives supplemental income from the "Social Security Trust Fund;" the Father and Grandson believe the "Social Security Trust Fund" owes them their 12.4% plus interest after their retirement; and the GreatGrandson is looking forward to contributing to the Social Security Trust Fund when his working career starts to build up this "nestegg" for himself, as his Father (Grandson) and Grandfather (Father) have taught him.

Fast forward 10 years: now the Father is to receive his 12.4%, but the IOU's have nothing to back them up! There is no money! However, if Grandson and GreatGrandson keep paying their 12.4% he can get what Grandfather received - As Long As Grandfather Is Either Gone Or We Zero His Social Security! Or (1) THE SOCIAL SECURITY MUST BE CUT SO GRANDFATHER AND FATHER CAN CONTINUE TO RECEIVE SOMETHING (2)THE INPUTS TO THE SOCIAL SECURITY TRUST FUND (TAXES) MUST BE INCREASED!

Fast forward 10 years: Grandfather is alive at 95! Father is still retired and may live longer than Grandfather! But Grandson has a problem: since GreatGrandson has had no progeny, and Grandson will be retiring in 10 years, he is beginning to wonder where his retirement will come from. Certainly Father and Grandson will be alive when Grandson retires and there will only be GreatGrandson paying into the "Social Security Trust Fund."

HE THINKS THERE IS A CRISIS!"

I believe GreatGrandson would be happy to start a private account with 6.2% of his "Social Security Trust Fund" money, since he see's that the demographics of his situation means he will have no retirement income when he reaches 65!

Let me know if you can follow the logic of the fairy tale. Does it help to understand where we are with our Social Security? Can people understand this parable?

WORD FOR THE DAY: detritus

HINT: Your should always keep a dictionary at hand to look up these words!

P.S.: Curt, comment on this and I will resume my plan on Social Security!

WE NEED OUR JUDGES...

Senator Orrin Hatch made a lengthy speech on the Senate floor explaining why W's judges should be getting an up or down vote on the Senate floor instead of a filibuster. Interestingly, he details Senator Byrd's support of changing Senate rules when it fits his agenda, but not when it is a Republican suggestion. Lengthy, but a good read for the weekend!

HAVE A GREAT WEEKEND!

WORD FOR THE DAY: withe

HINT: I ran across this word in a novella by Leo Tolstoy, "Family Happiness," and it has to do with peasants gathering grain in the fields.

MORE ANTITHESIS...

Charles Krauthammer is a great columnist and pundit who I stopped following closely a couple of years ago when he came out in favor of reparations! I found that hard to believe and have had difficulty paying attention to him since because it is such a silly idea. Pay reparations to the slaves progeny? Maybe to the slaves, if any were alive, but not the progeny! A subject for another day.

"Three Cheers for the Bush Doctrine" by Mr. Krauthammer is the finest explanation of why the actions of the U.S. since the invasion of Afghanistan have unleashed the quest for democracy around the world. It will be a long struggle, and may not develop exactly the way we would like, but it is only happening because of W! A good read!

WORD FOR THE DAY: diffident

HINT: "W is certainly not diffident regarding the Middle East."

ANTITHESIS TO "IN DENIAL..."

Mark Steyn shares a column on his web site from the Irish Times pointing out a much more likely analysis of the reasons for change in the Middle East and around the world than Matthew Yglesias' of yesterday. Mark clearly shows the impact of W on these changes, while Matt believes that it all was "in the works" from correct Democratic policies that just happened to come to fruition while W was in office. I'm not kidding!

These two columns truly illustrate the polarization in our society.

You might want to read the other columns following "The Bush Bandwagon." They are all enjoyable.

WORD FOR THE DAY: inane

Hint: "Not recognizing the connection between W and the changing Middle East is inane."

IN DENIAL...

Matthew Yglesias, a lefty blogger for whom I have much respect, illustrates the problem the left has: they cannot see what is causing the momentous changes in this world!

When Matt is in denial, I know they have serious problems.

WORD FOR THE DAY: enervating

HINT: "This obvious denial is enervating the left"

MINIMUM WAGE INCREASES MAY MAKE YOU FEEL GOOD, BUT...

Steve Chapman, a Chicago Tribune columnist, points out "The Illusions of the minimum wage" at Real Clear Politics. His point is that raising the minimum wage does nothing that it is supposed to do, except keep a segment of the population beholden - due to their not understanding Mr. Chapman's points - to the Politicians!

I strongly believe it creates another major problem that I think is receiving no attention. This may be a bit of my Economist education showing through. That is "COMPRESSION".
Raising any wage has the immediate effect of causing "compression" on all wages above it! If you increase the wage of the entry level McDonalds employee, then you must increase the wage of the next level of employees, and the next, and the next, ad infinitum!

When I started working in the mid 1960's, the minimum wage was $1.25 and the President of a large semiconductor company was paid $80,000 annually. Today the minimum wage is $6.75 and the same executive makes $432,000. These facts are not unrelated.

Is the entry level employee any better off? No! Inflation has taken all his gains. Is the President any better off? Theoretically no, since inflation takes the value out of his income also, but in his case he does get more disposable income beyond the effect of inflation, so there is some gain. This, in my opinion, is why the Politicians push minimum wage, to increase income for all of their constituency who do not realize the long term effect, and benefit in the sort term - ripe for picking in the next election!

Remember, wages are not absolute, they are related to each other. Therefore, raising minimum wage is a short term illusion.

WORD FOR THE DAY: sophistry

HINT: "Arguments in favor of minimum wage increases are sophistry."

THE RIGHT SIDE OF HISTORY

Mark Steyn does a little bragging over his insight into the Iraq War and points out a few inconsistencies from some European pundits and the left in general in The Spectator (you have to register at no cost to read the article). In doing so, he explains why W is on the right side!

WORD FOR THE DAY: plinth

Have a great weekend!

THOMAS OLIPHANT WRITES AN HONEST COLUMN...

on the Roper v. Simmons decision from the U. S. Supreme Court. Mr. Oliphant is not exactly a right leaning columnist, but he recognizes that: "Scalia has consistency and clarity on his side. The majority failed on both counts."

Though not necessarily in agreement with Justice Scalia conclusions, he does understand where he is coming from. And re the majority?:

"What is missing in the Kennedy opinion, however, is an understanding that the majority was simply adding a new absurdity to a bureaucratic maze that is already absurd."

Worth a read here!

WORD FOR THE DAY: cosset

HINT: "She has a need to cosset her children."

ROPER v. SIMMONS

Everyone should read the dissent of Justice Scalia (go to www.supremecourtus.gov, recent cases, ROPER v. SIMMONS, pages 64-87) in the above case which made illegal the execution of juveniles aged 16 or 17. I read it and found his logic quite solid. Have not read the majority decision yet, but Justice Scalia gives you a good feel for their logic.

You need to pay attention - their view of how our democracy works is certainly different than mine!

"By what conceivable warrant can nine lawyers [the Supreme Court] presume to be the authoritative conscience of the Nation?" This quote from page 10 of the dissent summarizes the logical question of the decision.

WORD FOR THE DAY: salient

HINT: "Justice Scalia's dissent has many salient points."

PEOPLE

"Bush trusts the American people, and he's happy to extend the same courtesy to the Iraqi people, the Syrian people, the Iranian people, etc."

Mark Steyn does an amazing job of explaining "The Arabs' Berlin Wall has crumbled" - his column today in the Daily Telegraph. The above quote summarizes it all!

Seems very appropriate today when the Supreme Court in a 5-4 decision takes away the right of 19 states to decide if they think it is appropriate to execute convicted felons at age 16 to 18 (it is already illegal to execute 15 and under) and in the decision by Justice Kennedy reference the laws of other countries as justification! The arrogance! Can't the justices listen to the people? We are not as dumb as you think! I have not read the opinion, but will and will post any further thoughts.

WORD FOR THE DAY: ganglia

HINT: "The Federal and State Supreme Court's are the ganglia of our legal system."