If It is Broke, Fix It.

Social Security is going broke. Interestingly, it was going broke before it ever paid a dime out and the government knew it. I have cited below a fascinating story about the creation of Social Security by the Roosevelt Administration and the fact that they had projections in hand in the 1930s that the system would be broke by 1980 and require more taxes. They were close on their projections - it was 1983 when new taxes were added - but the salient point is that Social Security's "lockbox" isn't locked at all.

None of us have a little savings account deep in the bowels of the Social Security Administration where our personal payroll deductions are faithfully and safely held and invested. No, it's a transfer tax from working people to retired people. The more benefits the politicians pile on to get reelected, the faster the transfer amount is depleted and the sooner new taxes have to be added to keep the system solvent and/or benefits have cut. The really nasty problem is what happens when the number of retired folks swells but the workforce goes down because of a low birthrate? What happens is Greece. And it is now happening here too.

The old adage still rigorously applies - there is no such thing as a free lunch. If a country's people and its government forget this principle it is only a matter if time before the whole system begins to spin out of control until it just stops. Then, who knows?  If it's broke, let's quit kidding ourselves that anything is "free" and fix it.

finance.townhall.com/columnists/johnransom/2011/07/23/social_security_broke_at_the_beginning