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View Point
WITH the recent political debate about Social Security -- should we reform it or leave it alone -- one thing is clear: It is still a mediocre deal for today's worker and a shaky promise to tomorrow's worker. Whether we are willing to publicly admit it, Social Security as we know it will be bankrupt by the time the Generation Xers or younger are of retirement age. Therefore, we must act now to save it. Social Security:
Reform it or lose itUnless we have forgotten, the money taken out of our paychecks is a tax. The funds deducted are not deposited in an account with our name on it. Instead, the money removed from our paychecks on Friday is sent to a current beneficiary on Monday.
This pay-as-you-go system literally uses the money from workers to pay off previous investors, the retirees.
Unlike a private pension plan, benefits are not guaranteed. What you put into the system is not necessarily what you will receive when you retire. Whether you actually receive money in retirement is at the discretion of whoever happens to hold elected office at that moment.
By 2015, the system will begin paying out more than it takes in (sooner if the economy slows from its current rate of growth).
Before the baby boom, in 1945, 42 workers paid taxes for each retired person collecting benefits. Today, there are a little more than three workers for each beneficiary. By 2030, when almost all baby boomers will have retired, the ratio will be 2 to 1.
Therefore, if you are a Generation Xer or younger, you will be personally responsible for providing a retired person's entire benefits for six months of every year.
According to a Cato Institute survey last year, 18- to 30-year-olds think that it is more likely they will see a UFO (43 percent) than a Social Security check (28 percent) during their lifetime.
If the current system is such a great deal, why aren't members of Congress part of the Social Security "retirement system?" If we look to the retirement benefits of our Hawaii congressional delegation, for example, I am sure that we will find them (and their spouses) to have substantially better pensions than most of us under Social Security.
Social Security is becoming a defining issue in the upcoming presidential election. Republican nominee George W. Bush has recently announced his plan for a partial privatization. Under Bush's plan, workers would be allowed to place a small (2 percent) portion of payroll tax dollars in privately owned investments accounts. These accounts would be safe, secure investment vehicles.
Contrary to popular belief, this debate must not be determined along partisan lines. Social Security affects all of us. This is a debate that is founded upon a more fundamental question: Who should control workers' retirement dollars? Al Gore says it should be the government. Bush favors trusting workers to make wise decisions with their own money.
To me, the debate over Social Security can be defined in even simpler terms -- are we better off keeping and investing the money we make, or sending it to Washington and relying on the government to take care of us? I, for one, want to keep the money and control my finances.
GIVEN the choice, what person would forgo all the savings and investment opportunities in the United States economy and instead choose to contribute to a government program offering neither competitive returns nor a guaranteed payout?
The stock market delivers a long-term annual return of better than 10 percent. Social Security will give today's younger generation about 1 percent -- assuming the system doesn't collapse. The decision should be a no-brainer: Reform now.
Bob McDermott is a Republican state representative
for the 32nd House District (Aliamanu, Hickam,
Foster Village, Halawa Valley and Aiea).