by Tom Klein

Created on: August 24, 2008

Social Security benefits and the social security system should be abolished. The system is bankrupt, will continue to be bankrupt, stifles economic growth, and does not grant any ownership in the funds or benefits to those paying into the system. Workers and employers make their payments to the government, and the government has no legal obligation to pay benefits when workers expect them, and in fact will not be able to pay benefits for many workers without taxing more wages or increasing the retirement ages for drawing social security benefits. Why shouldn't everyone own their social security accounts, and be able to transfer those accounts to their heirs, and/or invest the funds as they see fit? Because then the government could not take what is paid in and give it to retirees, nor could the government change at will when you could start taking your own benefits. A mandatory savings program for workers would serve the same purpose as social security, and would actually provide a huge pool of privately-owned capital for non-governmental initiatives.

Currently workers pay 6.2% of their total compensation (up to slightly over $100,000 of compensation) to the social security system, and their employers pay another 6.2% to the social security system. Without social security, another 12.4% of compensation would be available to workers and employers. After making these payments, the workers paying that money to the government own nothing - if the worker dies, he does not get that money back to give to his heirs (there is a small burial payment of around $200). If the stock and bond market perform extraordinarily well - like they did from 1982-2000 - that money that the workers and employers paid to social security could have earned high returns; instead the workers have the same unfunded promise to pay that they had before the unprecedented stock and bond market returns of those two decades.

As if the lack of account ownership were not enough, the social security system will begin paying out more than it takes in in 2020. It can go another ten to fifteen years after that because of what is called the "trust fund", which is the excess of payments to the system over what the system paid out for the past couple of decades. There really is no trust fund though; that is just government accounting. Really, the government took in more in social security payments than it paid out so it borrowed that money from the social security system and gave the social security system

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