While Congress bickers and the President dithers, roads are crumbling, bridges are failing, dams are cracking, and water and sewer systems are leaking all across the United States. If that's not enough to worry about, the government is threatening to default on the $2.5 Trillion it has borrowed from the Social Security Trust Fund, and few private employers are offering decent retirement plans.
A simple solution to all of these problems can be found in a secure national retirement system that allows all American workers and small-business owners the opportunity to participate in a tax-free infrastructure fund invested in the bonds issued by state and local governments.
Don't Mess With Social Security
In spite of the constant lies being told by those dedicated to its destruction, Social Security is one of the most successful government program ever created in the United States.
In 1935, the American people entered into a contract with their government to purchase an insurance policy ensuring they did not become destitute when they were no longer able to work.
Today, more than 90 percent of all workers and the self-employed are covered by Social Security, and one in six Americans, or more than 54 million, are receiving a benefit. Most beneficiaries are receiving a return on their contributions that is far greater than they would have received if they had invested the same funds in the private financial markets.
It has been a good bargain, a win-win situation. For the oversight of their contributions, workers and small business owner only pay one-quarter of the amount paid by private pension funds to their money managers. Overall, more than 99 percent of the premiums go to benefits and less than 1 percent is spent on overhead.
The only unfairness of the system is the annual cap on contributions ($106,800 in 2011), which requires lower- and middle-income workers and small-business owners to pay a higher FICA tax rate (as a percentage of income) than those who earn more than the annual cap.
There is a present surplus, and there are sufficient assets in the Trust Fund to pay 100% of benefits until 2042; however, since only 83 percent of all wages paid are subject to social security taxes, elimination of the cap would increase annual social security revenues by almost 20 percent, or roughly $100 billion per year, more than enough to take care of any foreseeable future "shortfall."
At a minimum, the law should be changed to establish the income cap at the president's salary, which is presently $400,000 per year.
The Trust Funds have been wisely and conservatively invested in the interest-bearing bonds issued by the Treasury Department (as required by law), which has benefitted the efficient operation of the government. However, as the overall federal debt has ballooned and the economy has tanked, bond redemption to pay benefits has to be paid out of current tax revenues, or borrowed, which further depresses the economy and increases the debt.
Threats to default on Social Security benefits to American workers and small-business owners place these citizens in a subordinate position to foreigners who have invested in U.S. Treasury securities and who expect full payment.
For perspective, the total federal debt has doubled in the past 10 years to almost $14 trillion, or more than $100,000 for every American household. As of January 2011, foreign holdings of Treasuries amounted to $4.453 trillion, and the amount held by the Trust Fund was only $2.5 trillion.
The only way for the government to satisfy these obligations is to create jobs for workers and to encourage the profitability of small businesses. The smartest way to do this is to repair and improve the infrastructure of America.
Establish a Safe Retirement for Everyone
The average annual benefit of $12,912 paid by Social Security is barely above the official poverty line of $9,000 revealing that the benefit is a minimum safety net, rather than a comfortable retirement.