Tag Archives: entitlements

Is Social Security a Good Deal?

15 Wednesday Feb 2017

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Each year at about this time you can receive an updated social security benefits statement from the Social Security Administration (https://www.ssa.gov/myaccount/). This document will tell you what you can expect to receive on a monthly basis when you retire.

We currently pay 6.2% of our wages towards our retirement (social security). Our employer matches that amount so together 12.4% of our wages are “set aside” for our retirement. Well here is the rub. Even though politicians constantly refer to the “Social Security Trust Fund”, there is no such thing. The trust fund is basically a promise to pay us something in the future.

It is helpful to look at this like a 401K plan. A 401K plan is a form of retirement whereby employees set aside a certain percentage of their earnings for retirement. This set aside is invested in a personal account that you own. Typically the investment choices are high quality mutual funds or ETFs (Exchanged Traded Funds). Many employers will match some or all of the employee deduction. Over a lifetime of employment this can add up to a nice retirement nest egg.

In essence social security is doing the same thing with some very important differences. First, the money that you pay in taxes and the amounts that your employer pays does not belong to you. If you would work for 40 years and die before becoming eligible for benefits, the money is lost; your surviving family has no rights to the money even though you paid into it for 40 years. The same goes if you collect a benefit for a couple of years then die, there is no surviving benefit for your family. Second, your money is not invested and does not grow. In addition, there is a maximum benefit amount that is capped by the social security administration regardless of the amount of taxes that you pay.

There have been efforts by Republicans to privatize social security. This would mean that you would own the money just as you do your 401K. You would decide how to invest it. And you would determine who your beneficiary is if you die. Under Social Security the government is everyone’s beneficiary. When social security was put in place in 1935 the retirement age was 65. The expected life expectancy at that time was 62 years for women and 58 years for men. This should be very telling.

There is always a big fight over privatization when it is proposed. The Democrats argue that individuals lack the ability to choose investments and would be at risk of losing their entire benefit. They say the stock market is too risky. They also argue that there would no longer be a guaranteed benefit (a legacy union concept). In reality the reason these politicians fight to keep it is one to preserve big government, but also since inception the taxes collect have far exceeded the benefits paid. This has created a slush fund to help balance the budget and provide money to spend on other projects. The problem with this is that the pendulum is about to swing the other way. When the baby boomers begin to retire in great numbers benefit payments will far outweigh taxes collected. And since the surpluses were spent rather than put in a lockbox or trust fund as you are told there will be major shortfalls which will have to be funded. From 2000 thru 2009 the taxes collected exceeded the benefits paid by an average of $164 billion per year, from 2010 thru 2016 that number dropped to only $34 billion.

To illustrate just how bad a deal that Social Security let’s look at how private accounts would work. I used a sample case from the SSA website. I assumed that the employee and employer taxes would be invested in an account that you own. The money would be invested in an S&P 500 fund to keep it simple. An administrative fee of 0.17% is used which is consistent with these funds. In this example the person began to work in 1975 and earned $14,100 and retired at age 66 making $137,100. The person would begin receiving $3,064 per month until his death.

If the employee was able to invest his taxes as described above, he would have an account with a balance of $1,299,737 at retirement. With this he could do a number of things. He could purchase an annuity which would give him a guaranteed monthly payment of $9,767 (assuming 2.5% rate over 13 years), or he could leave it invested and draw out money as needed. Even if it earned zero interest, he could take a monthly payment of $8,332 over 13 years. And when he does die his beneficiary gets to keep the money. In this example the taxpayer’s benefit was $1,045,660 less than a private account would have been.

Opponents to privatization always point to the riskiness of the stock market. Yes it is risky and you can lose 100% of your investments. But plan design and education can greatly limit risk. If you look at the returns over all of the years (link below) you see that years with negative returns are highlighted. In 2008 when the internet bubble burst you see a 40% loss. Despite this over this time period the average return was about 7%.

This is a travesty and all tax payers should be able to own and manage their retirement accounts. It is too late for the baby boomers to benefit from privatization but we owe it to our youth to address this.

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Baltimore Riots Highlight the Failed Liberal Policies of the Democrat Party

28 Tuesday Apr 2015

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Barack Obama, our first black President, was elected on a “Hope and Change” campaign. Obama was going to right all wrongs, repair race relations and make all the countries around the world love us. The problem is that he left the failed liberal policies of the last 50 years intact. He even doubled down on them by adding a new entitlement, Obamacare, and adding millions of Americans to the welfare rolls. He has promoted the victimology of blacks and claims that racism is pervasive in our nation’s police forces.

The riots in Baltimore are not about racial injustice. Baltimore is led by a black mayor. The police chief is black. The nation’s President is black. No this is more about opportunity, the opportunity to loot and destroy property. Just as in Ferguson many of the rioters are not from Baltimore. Radical groups like the New Black Panthers are usually the organizing force behind the destruction and rioting. Blacks have voted in lock step for Democrats and have received nothing in return. As a matter of fact they are worse off than ever. Here is why:

Failed Liberal Policies of the Democrat Party
• Encourage and celebrate single parent families, ridicule old fashioned two parent families

• Teaching blacks that they are victims and cannot succeed without government help

• Teaching blacks that they need the help of affirmative action to get in college or get a job creating disincentives for hard work and create a sense of entitlement

• Policies designed to preserve teachers union monopoly on school systems and prevent competition resulting in poor educational results

• Destroy the work ethic by creating generational welfare and constantly extending unemployment benefits

• Encourage blacks to live in big cities to protect their votes

• Encouraging the infanticide of the black race with abortion

• Chip away at the moral fabric of America with a war on religion.

• Pass legislation like minimum wage which disproportionately affects our youth, especially minorities.

• Pass legislation like the earned income tax credit which hurts the poor and dis-incentivizes work.

• Support waves of illegal aliens which takes jobs away from minorities and teaches them that laws have no meaning

• Focusing on helping criminals rather than the victims and demonizing police forces as racists (especially since Obama has taken office)

Maybe it is time for real change.

What is happening to our country?

28 Tuesday May 2013

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We have learned that the IRS has been used as a tool for Obama, bullying conservative groups to silence them. The Department of Justice has been spying on Fox News and AP reporters. Our embassy is attacked by terrorists and our government blames it on a video and then covers it up. We sell guns to Mexican drug dealers hoping that Americans get killed by them to support anti-gun legislation. Our President fails to submit a budget as required for years and runs on massive deficits year after year. We have turned our backs on one of our greatest allies Israel but have embraced the terrorist group Muslim brotherhood. Gasoline prices have gone from $1.84 before Obama’s first election to $3.70 because of his failed energy policies. Real unemployment has been around 15% for quite a while and economic growth is stagnant. Almost a million fewer people have permanent jobs since he took office.  We are no longer explorers. NASA has been taken out of the space business and is a Muslim outreach agency. Almost 47 million Americans are on food stamps, 15 million since Obama took office. And our premier healthcare system is about to become a European style system with all of the bells and whistles like long waits for simple procedures and doctor shortages.

It started at the dawn of the 20th century with Woodrow Wilson. Wilson was a power-hungry person who did not believe in the separation of powers and checks and balances. “Government does now whatever experience permits or the times demand….” wrote Wilson in The State. He believed as president his power should be limitless. He wrote the following in Constitutional Government in the United States: “The President is at liberty, both in law and conscience, to be as big a man as he can. His capacity will set the limit….” Wilson harshly suppressed dissent and resistance among citizens and the press. Our current President has learned this well. He was fiercely opposed to the idea of individualism, and was a critic of our Constitution. He wrote “No doubt a lot of nonsense has been talked about the inalienable rights of the individual, and a great deal that was mere sentiment and pleasing speculation has been put forward as fundamental principle,” attacking the very individual rights that have made America great. He brought forth the concept of a living document for the Constitution, a concept near and dear to the left today.

Next in line was Franklin Delano Roosevelt. He did a great deal of damage to our country by establishing an infrastructure of big government.  Despite all of the New Deal programs, unemployment was 20% after 8 years as president. Historians and the mainstream media give him credit for getting us out of the Great Depression but in reality the war was the real reason for its end. He shamelessly egged on the Justice Department and the IRS to prosecute his political opponents. He became frustrated with the Supreme Court who began to chip away at his intrusive programs. Shortly after his re-election in 1936 he attempted  to pack the Supreme Court with as many as six additional justices.

Then came the so-called “Great Society”. It was President Lyndon Johnson’s massive growth of government that built on Wilson and Roosevelt’s liberal administrations. Some of the initiatives were:

  • Education: sixty separate bills including National School Lunch Act
  • Medicare & Medicaid
  • The Environment: several measures introduced
  • Job Corps
  • Head Start: program for four and five-year-old children
  • Food Stamp Act
  • HUD developed
  • War on Poverty – forty programs that were intended to eliminate poverty

This formed the infrastructure for the Democrat Party to build and maintain its power base for future elections. The Medicare and Medicaid programs are the main drivers of our national debt. The food stamp programs and the war on poverty programs along with Medicare and Medicaid were successful in creating a culture of dependency. But the party knew that these alone would not be enough. Perhaps the most destructive thing for our country but the most successful strategy for the Democrats was the systematic destruction of our education system. The school lunch programs and head start programs sound like good initiatives on the surface. However when looking under the hood the school lunch program is used as a form of bribery for States to toe the line if they want money. Head start programs are another hook for the States and also were a bone to the unions. These programs moved education into a major player within the government. The final death-blow to the education system came in 1980 when the Department of Education was elevated to a Cabinet position.

The Democrats realized that the Department of Education could be used as a recruiting tool, molding young minds to buy into their leftist agenda. The left are very patient. They knew that this was going to take a generation or two to fully take effect. History was abandoned and replaced with “social studies”. The Founding Fathers were made out to be slave owners at best. Environmental issues dominated all curriculums, including even math. Students learned that their self-esteem was more important than learning. Teachers receive degrees in  “Education” rather than in their content subject matter. The natural effect of this is that American students would no longer be able to compete in math and science with the world. Test scores started to decline and tests were dumbed down. Discipline in the schools was eliminated. The result fifty years later is a school system that is full of students who do not know who our Founding fathers were, they do not know why and how America was formed (except that some Europeans stole the land from “Native Americans” and they do not have a clue about most of our history.

Another key strategy of the left was to destroy the moral fabric our America. This was done with attacks on school prayer and Christianity in general. Since Roe v Wade we have seen the deification of abortion by the Democrat Party. Reciting the Pledge of Allegiance was stopped at many public schools. Marriage and the family unit has been under attack for years. Single moms were elevated, gays began pushing their agenda as civil rights, marriage became under constant attack, and single parent households were encouraged by the government entitlement programs.

Immigration policy is yet another tool in this grand strategy to consolidate power. Our immigration policy used to be a reasonable policy of filling needs. We were selective in who we would bring in and we tried to satisfy needs such as scientists, mathematicians, doctors, etc. Today the policy is based solely on political considerations. Immigration laws have not been enforced making it easy for millions of new Democrat voters to come here and receive benefits.

Our current President seems inspired by these great destructors of the past. He learned from Wilson that individualism does not matter and presidential power should limitless. He learned from Wilson and FDR how to use his agencies to attack his enemies and unfriendly journalists. He learned from FDR and LBJ that government entitlement programs, once in place, were almost impossible to eliminate. He knew he had a short window to do as much damage as possible so he focused like a laser on Obamacare. He also spent trillions of dollars buying up votes for his re-election. This piece of legislation if unaltered will ruin the best albeit not perfect healthcare system.

This could not be achieved without the willing help of the main stream media. They happily ignore the decline of our school systems, the moral decay of our country, the massive debt of our government and the faux science behind global warming because they want to support the Democrat Party.

So in reality it should come as no surprise what is happening today under Obama. He has bought off Americans to the point where they are apathetic about our country. Our young do not have the historical context to understand issues. They do not know that our ancestors came here because of our liberty and an opportunity, not a handout, to prosper. Many of the baby boomers have no work ethic which has been passed on to their children. The press, although growing weary defending Obama, will remain true to their left-wing beliefs and spurn any journalistic inclinations. And unlike the Republican Party, the Democrat Party will avoid independent investigations and will refuse to hold Obama accountable. We get what we deserve.