(There's nothing risky about putting money in a bank.)

(this text written sometime in 2005) -- Let’s say that you aren’t a longshoreman who makes $150,000 a year for keeping track of the numbers on the containers unloaded or loaded by the big cranes at the docks.  Let’s say, instead, that you work at a machine shop, running a lathe.
   You started doing that back in 1963 when you finished your hitch in the Air Force.
    Over the years, your salary has increased because you got raises for being more experienced at what you do, and raises just to keep up with inflation.  You began at four bucks an hour.  Today, you make sixteen bucks an hour.
    In April, you’ll be 62 years old, and after forty years at the same job, you’d like a rest, and a chance to look around to see what else you might like to do.  How much money do you have in your social security account after paying into it all these years?

    None.

    Every dime is gone.  Spent by congress.  (They just dumped in another batch of I.O.U.s  the other day, in fact.)  When you began your working life, the president was a Democrat and both houses of congress were controlled by Democrats. 
    Since 1994, we’ve either had a Democrat president with a veto that Republicans usually didn’t have the numbers to overturn (welfare reform being the sole exception), or a Republican president whose party had a bare majority in (sometimes only half of) congress to work with.  But, in 2002, Bush won the Senate back. In 2004, he won bigger majorities on the Hill.  He has frightened the American Left by publicly stating he wants to fix the mess the liberals began and have maintained during all those years in power.

(10/26/2010: He didn't make it.  Half way into his second term, Democrats (Progressives) retook Congress and the battle was lost.)

    If you paid fifty bucks a month into your social security account for forty years, your investment was $24,000.  If, with your employer contribution, you put in a hundred a month, $48,000 will have been paid in.  In either case, the day before you retired, there wasn't a dime in that account.  If you pass away two years after retiring, your heirs will lose perhaps half of what you paid in.  If you die the day you retire and your spouse has gone before you, your adult children will get a small burial check, and nothing else.
    If the fifty bucks had been deposited in a local, government-guaranteed bank like the kind where you keep your checking and savings accounts (totally risk-free), at 2% simple interest compounded annually on the ever-growing balance, the day before you retired, that account would contain $37,489.  At a hundred bucks a month, it would contain $74,815.  At $150 a month?  $111,781.  Six figures.

   All yours.  If your entire family was fed into a plastic shredder by Saddam Hussein, you get to leave all of it to the flat earth society or your cat.  Whatever you want. 

    That's what G.W. means by an "ownership society."

    The Social Security fund, my friends, as it is presently  constructed, is a (in years to come known as a Bernie Madoff) Ponzi scheme.  A pyramid scam.  Illegal if done by private citizens.  From the first day of its existence, like all such schemes, it was destined to collapse because such scams rely on a pyramiding growth of accessible funding.  (More people paying in than are taking out.)  All you have to do to bring it down is to have a population rate decline – like after the Baby Boom. 

     There’s no money in the box, and the government can’t just print lots of additional dollar bills because that causes inflation.  People on a fixed income (like Social Security) will be pissed if that happens.
    That leaves three possibilities as we approach the retirement years of the Baby Boomers..  One, cut benefits.  (Hear the old folks howl!)  Two, raise SS taxes on the now smaller workforce. (Hear the young folks howl!)  Three, cut other kinds of government spending.  (Hear the bureaucrats and special interest groups howl!)  Without dramatic growth in the private economy, rather difficult with high taxes and fewer people working, we’re done for.  We’re boxed in every way we look.

    It’s a mess, isn’t it? 

    Social Security is a decade or so from collapse. The Baby Boomers will drive it off a cliff.  The Democrats knew full well that something like this was bound to happen at the time they created the system, and know it full well to this day. 

If you think your Social Security deductions are safer in the hands of politicians than they are in the vault of your own, local, private bank, oppose Bush.  If you like the idea of actually having that money in your own passbook, where the politicians can't get at it, support Bush..

UPDATE (January 2005)

The text segments that follow come from a piece by Donald Luskin, the chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. 
 

An "index fund" is a kind of mutual fund that buys the stocks offered by an individual stock exchange.  Say, shares from the DOW exchange on Wall Street in NYC.  You see the DOW numbers on every network evening news show, every weekday of the year that isn't a national holiday.  There are NASDAQ index mutual funds whose portfolio duplicates the technology stocks on that exchange.  The Thrift plan described above uses the S&P stocks.

If you like a lot more growth potential than a bank, and doubt very much that government employees are big gamblers with their retirement accounts, tell your favorite politicians to use this Thrift method involving index funds as one of the options in the new approach to Social Security. 

If George gets it through congress, and you are in your twenties or thirties, the money you will have in that account the day before you turn 62 will put a smile on your face a mile wide. Seven figures is not beyond the reach of most middle-classers. 

It's the difference between "investing" in the present "fund," which returns a minus interest rate (you read that correctly) and the simplest of private locations, all of which return positive interest rates and, which in the case of your bank, offers not a whit of risk.

(LL)

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