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Wherever politics intrudes upon economic life, political success is readily attained by saying what people like to hear rather than what is demonstrably true. Instead of safeguarding truth and honesty, the state then tends to become a major source of insincerity and mendacity. – Hans F. Sennholz
Fearing legislated failures, the politician’s speech is seldom precise or logically reasoned. Seeking a favorable image, the politician talks in generalities, exaggerates and obfuscates.Social Security – Fairness for Young Americans
This is an election year, which exacerbates political gamesmanship and mendacity. Currently, the DC joust is the payroll tax cut. And Democrats probably have a political advantage in reducing the payroll tax by 2% for every worker in American – 160 million workers. Workers will have up to $2000 in additional take-home pay. Who doesn’t want more spendable income?
This week, President Obama, in the State-of-the-Union speech, demanded, “Pass the payroll tax cut without delay.” However, the following statement is probably more accurate, “Pass $325 billion more Social Security debt on to young Americans and even the unborn.” The payroll tax is intended to pay for Social Security benefits. Generally, the Social Security tax is 12.4% of a worker’s income - 6.2% is paid by the employer, and 6.2% by the employee.
Immorally, the Social Security tax revenues for over 40 years have been raided and misappropriated by many administrations – Republicans and Democrats alike. Previous administrations intentionally and wrongly used the money for general government programs, and wrote IOU’s to Social Security. Hence, America has enormous unfunded Social Security obligations, which must be paid by more taxes – in addition to the 12.4% Social Security tax.
Immorally, Presidents like Lyndon Johnson used a budget gimmick and the Social Security revenues to hide the cost of the Vietnam War. Richard Nixon raised the benefits by 20%, which he made known by a note attached to the seniors check just before the 1972 presidential election. Johnson and Nixon didn’t care about future federal debt obligations. Once again, President Obama, the Democrats and some Republicans also don’t care. They want a winning issue for the November 2012 election.
Realistically, most of the 160 million American workers do not understand the ramifications of their increased pay checks. They don’t appreciate that the unfunded, Social Security liabilities must be paid by additional taxes, and that Social Security will probably become a welfare program. Depending on personal savings at retirement some of today’s workers will receive benefits, many will receive reduced benefits and some will receive none. How is that fair to every worker that paid the 12.4% tax?
Worse, future workers most surely will be taxed more to maintain some semblance of the Social Security program – government hates to terminate a program, especially Social Security. Thus, young workers – who never had an opportunity to object to government’s forty years of deceit – will be burdened with increased taxes and reduced benefits. This is modern America’s “taxation without representation.”
Most likely the 2012 tax-cut gambit to influence 160 million voters will become law, and the Social Security swindle and deception will continue. The following is a solution which would permit young people to be free of the Social Security burden and fraud.
The Freedom Bargain:
Allow young American workers to put their entire payroll tax into an IRA. That is 6.2% of their income. In exchange for investing in their IRA, the worker forgoes any and all claims to Social Security.
Call this the Freedom IRA, which is in addition to all other forms of retirement accounts – 401k, Roth 40Ik, private accounts and others. .
Mechanics of the Freedom IRA:
In exchange, a worker that elects to create a Freedom IRA puts 6.2% of their income into an IRA and irrevocably gives up Social Security. The employer deposits the money directly into worker’s IRA.
Young workers will benefit from private accounts which they own. Young workers will also be free from the manipulations and deceits of the politicians.
Today’s politicians cannot claim that which will destroy Social Security. Wrongfully for over 40 years, thousands of politicians have already raided and redirected the money intended to pay benefits.
Free young people from political gamesmanship and fraud. Allow them to save 6.2% of their earnings in their own Freedom IRA. America, at least, should be fair to young workers and those who are about to become workers.