SOCIAL SECURITY FOR THE YOUNG

Sixth In A Series

by Ed Henry

Newt Gingrich tells us that surveys show the younger generation has little faith the Social Security system will be there for them. While they are forced to pay into the system, they do not believe they will reap its benefits. I believe him. I believe surveys show this.

I also believe that these same respondents probably think that solving the deficit has eliminated the national debt. Many of their older counterparts think so too. So what?

Does the fact that so many Americans have not studied the issue, even thought about it much, or simply believe the lies and deceptions others have laid on them --- somehow make it true?

Wasn’t it Newt Gingrich who, just two years ago, was telling us that we were graduating kids from high school who couldn’t read their diplomas? Now, he’s quoting them.

What’s unfair is that Mr. Gingrich, who knows better, is using these stories to promote the idea that Social Security is "in trouble" much like the old line --- when did you stop beating your wife?

The loyal opposition within government, the people who work for the Social Security Administration, have repeatedly told politicians that they should "stop frightening people." That’s about as far as they can go without risking their jobs and it certainly doesn’t stop politicians looking for campaign issues.

Not so long ago, not really that far back in the history of mankind, almost everyone believed that the earth was flat. If you sailed far enough away from shore in almost any direction, your ship could fall over the edge of earth and all would be lost.

In fact, it wasn’t until well after Columbus discovered the new world and long battles against superstition by sixteenth and seventeenth century scientists like Galileo and Copernicus that average people began to accept the fact that we all live on a large round planet.

Up until that acceptance, the captains of sailing vessels had major problems dealing with the beliefs and superstitions of their crews.

Besides coercion, intimidation, threats of violence, the cat-of-nine-tails, and "press" gangs, one of the things old sea captains used was the ceremony and mystery of navigation. Fully dressed in uniform, the captain and his first mate would appear on deck with their sextants, time pieces, books and notes to make a great ceremony out of taking rather simple shots of the sun and stars. About all they were generally doing was getting the declination of the sun in order to determine latitude or looking for familiar stars in much the same way Arabs had navigated deserts before Christ.

Yet, all this pomp and ceremony not only convinced the crew that the captain knew what he was doing but usually convinced the crew that they needed him. Only the captain could get them home again. So they had better protect him and certainly not entertain thoughts of mutiny.

This is not too far from the behavior of modern politicians who tell people that things are too complicated or complex for average citizens, convince you that they are on top of things, and play on people’s superstitions or fears --- even planting some of these superstitions themselves.

I really find it hard to believe that anyone can think that a company handling hundreds of billions of dollars every year, operating with less than 2% overhead or expenses, making a net profit of $96 billion this year alone, 1998, and holding $631 billion in the bank --- can be in serious trouble. Yet, that’s what many young people seem to believe. They think Social Security will not be there for them. They swallow the disaster stories.

Part of the problem might be the "words" politicians use in their spin talk. For instance, you hear a lot of talk about Social Security being a "pay-as-you-go" system. Daniel Patrick Moynihan even claims that Social Security should be "returned" to a pay-as-you-go system.

This is a term used by people who have spent their lives in institutions or have been otherwise sheltered from the realities of business. Can you think of any business in this country, other than Amtrak or those supported by government, that are not on a pay-as-you-go basis? Do you think General Motors or General Electric would survive more than a year if they didn’t sell their products, pay their suppliers and employees, and otherwise pay-as-they-go?

To anyone who has ever had their own business or been involved with the financial aspects of business "pay-as-you-go" is simply a hack way to say "break-even."

Until about fourteen years ago, Social Security operated close to break-even with a slight savings pad in case of emergency. It’s only since the last time Washington borrowholics told us Social Security was "in trouble" that payroll taxes were significantly raised and Social Security began accumulating this giagungha trust fund. All of which has been stolen by the borrowholics.

Posted to the Social Security Administration’s web site is the following:

"During World War II patriotic posters declared LOOSE LIPS SINK SHIPS. It was a warning against irresponsible talk. If such warnings could be issued in the realm of public policy discourse, there would have to be a poster against the often stated, but wildly irresponsible, idea that Social Security is a ‘Ponzi scheme,’ or a ‘pyramid scheme,’ or a ‘chain letter.’ It is hard to trace the origins of this confused notion, but it is even harder to read any sample of contemporary editorials regarding Social Security without encountering this idea."

Charles Ponzi was an investment broker in the twenties who introduced Boston to the wonders of pyramid investment and, what later became, the chain letter. We all know how this works. Initial investors are supposed to get extravagant returns from many later suckers.

Social Security, however, operates on a very linear scheme where current contributors are part of a larger number than those preceding them and now retired. It’s a simple system based on population increase or the simple fact that the next generation will be larger in pure number. It’s like any other company operating on market increase and "pay-as-you-go" or break-even. And it is quite capable, and has often made small adjustments to changes in the market.

Believe it or not, there are some quite reputable people who think, because there is no actual cash (bills and coins) or stack of certificates (mountable paper) in the Social Security Trust Fund, that there are no real assets there, that it’s just a sham.

No doubt, these same people must think that it’s just a game when they, themselves, write checks, use their credit cards, shop the internet, make airline reservations, receive wire transfers, or even have their paychecks automatically transferred to their personal bank accounts. Nowadays, it’s even possible to pay your income taxes over the telephone.

Banks have been computerized since the sixties. We went off the gold standard in the seventies and Fort Knox has been empty ever since. Even the Federal Reserve breaks the amount of money in circulation down into two large categories --- "A" money, which is currency in the form of bills and coins, and "B" money, which is currency in the form of things like checks and electronically managed funds.

Yet, some people continue to believe that if you can’t hold it in your hands, then it isn’t real or doesn’t exist.

In fact, this fallacy is so prevalent that Congress felt obliged to pass a bill requiring some unfortunate secretary in the Treasury’s Bureau of Public Debt accounting to periodically print up "hard copy" certificates and records of what is in the Social Security Trust Fund. She keeps these in four file folders locked in a file cabinet in her office.

What can you say to people who do not believe in modern banking, credit, and accounting methods? How can they be brought up to speed?

These are probably the same people who have trepidation about technology, get a little quirk when speaking to an answering machine, think computers are confusing and complicated, and may even prefer to hide their savings in coffee cans or under mattresses. They may even be the people who believe that the old days were much better, and prefer to watch old western movies where the men look like they’ve slept on the desert and the women look like Little Bo Peep.

Hey, when seven of us lived in the same house Bonnie and I live in now, my brother and sisters and I used to complain about having only one bathroom. My dad would tell us we were lucky we didn’t have to use an outhouse. There were still quite a few outhouses around in those days and I remember Stan Wentland losing his father’s wristwatch down one at Camp Lowden.

Today, I don’t think my poop is any less real when it disappears into the City’s sewer system, along with eight gallons of water, than it was in the days when people stored it in a hole in their back yards. And I definitely do not want to go back to the smell of the old days, although a return to the gold standard might help to reign in the irresponsible borrowholics in Washington.

We may have a great many people who fall for the spin that Social Security is doomed, but there is little basis in fact. Much more probable is the idea that Washington’s borrowholics are simply searching for campaign issues and ways to continue their insatiable borrowing habits.

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