Social Security Fund Dries up in 2033

Wednesday, June 05, 2024

At USA Today, Russ Wiles speculates on what will happen when the Old Age fund for Social Security runs out of money in 2033:

Higher taxes, benefit cuts, or a combination of both loom in a future scenario that is no longer all that distant. Congress still has time to make fixes to shore up the retirement system but hasn't shown any such resolve.

Here are answers to six key questions on what might happen...
There's plenty more of that in the column, if you're interested in hearing about everything but a long-term solution to the consequences of central "planning" as applied to retirement.

About the only thing not mentioned is the alternative of getting the government out, which is not surprising since you know the Democrats will never touch it.

The GOP, with Trump leading the charge, won't either, since they're hell-bent on outdoing the Democrats at their own game, rather than offering voters sorely-needed alternatives to our impossible status quo.

One alternative -- a transition to private savings accounts as a means of sunsetting Social Security -- is covered by two pieces at Capitalism Magazine.

In the first, John Stossel chides the Democrat-lite xenophobes of MAGA by reminding us that Chile found a good way out of their retirement mess:
Private accounts have been tried in a few countries. In Chile, the investment they created helped make Chile the richest country in Latin America. (Before, Chile was poorer than most.)
Stossel's column is intriguing, but perhaps short on details. For those, the second piece, written in 2001 by Don Luskin, gives us an idea of what this entailed.
There will be nothing to take anyone's hands off of, if we don't address this problem soon. (Cropped from image by Djembayz, via Wikimedia Commons, license.)
... 20 years ago Chile completely -- and totally successfully -- restructured its bankrupt social security system into an exemplary program of private investment accounts, and transformed itself from a nation of serfs into a nation of investors.

Chile started even deeper in the hole than we are. When they implemented their restructuring, the implicit debt of their former system was a crippling 80% of gross domestic product. Here's how they dug their way out.

First, the Chilean government guaranteed those already receiving benefits that their payments would be unaffected by the restructuring. Second, every worker already contributing to the old system was given the choice of staying in that system or moving to the new one. Those who left the old system got a tradable "recognition bond," reflecting the value of the claims the worker had already acquired on the old system. The vast majority elected to move to the new system. And third, all new entrants to the labor force were required to enter the new system.
The good news is that it's not too late to avert a disaster; the bad is that neither Joe Biden nor Donald Trump is going to get started even talking about what to do.

To advocate for the end of Social Security is to risk being accused of wanting to throw old ladies out on the streets: But if we don't do something soon, we may learn the hard way that nothing can do just that better than the government Ponzi scheme we have in place now.

-- CAV

P.S. Here is an analysis of how the Chilean system, which is about to be ended, was badly implemented.


: Corrected two typos.

No comments: