NamedPipe

Since Social Security is the hot-blog-topic-of-the-day, I figure I would finally put my thoughts down on this one. And then never discuss Social Security again here on this blog.

• Social Security is a tax
  This means you can’t expect to track the same way you track deposits in your 401k. As with all taxes, they just go into a big pot and get spent in a manner that is decided by our elected officials. I’ve never tracked all my Social Security taxes to make sure I’m going to get them back at some point in the future. Works the same as health insurance. The $1200 per month spent for my families health insurance is not in some pool that I’ve got to spend each year, or make sure I use it up in the future. “Honey, we should make sure we plan some elective surgery in December so we use up the $14,000 we’ve invested in insurance this year.” Social Security is a shared risk system, just as health insurance is.
• The Trust Fund is real, but tied to overall financial health of the Federal Government
  There are many who argue that the Social Security Trust Fund does not exist. That is simply not true and comes from a misunderstanding of government accounting. Government accounting (at least in the U.S.) is cash based. There is very little forward looking in government accounting. The goal is to make sure we can pay the bills this year. While that may seem short sighted, it also keeps the accounting simple and transparent. In the case we can’t pay the bills, we have 2 options – cut spending and/or increase taxes. Corporations have the goal of making sure that current money invested in them is worth more in the future, thus they are future-facing and profit-oriented. So corporate accounting likes to examine future debt, current assets and falsely portray spending as if it happens over years. This is not true for government. So, yes we’ll have to figure out how to come up the the cash to pay out the investments in the Trust Fund, but somehow we were able to come up with $80-90B each year for the past couple of years to pay for the Iraq War – so we can come up with cash when forced.
• People under the age of 35 don’t care about Social Security
  Many draw attention to 18-35 year olds that favors private accounts when surveyed. Yet, if you go talk to a financial adviser and ask them about how this age group is planning for retirement, they will tell you that retirement isn’t even on the radar for people under 35. This is little like asking Americans whether Parisians should all speak English and having 70% say, “Yes”; and then asking how many Americans plan to visit Paris in their lifetime and finding out that only 1% plan to. Sure I have an opinion on private accounts in Social Security, do I ever think about that opinion outside of when pollsters asks about it? No.