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Feric -> RE: Will Congress destory Social Security? (2/6/2008 4:15:02 PM)
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The Social Security System is held hostage by problems with government revenues. To avoid confusion, let me digress with a little background information.
The Federal Government makes money via one of three methods: Taxes, Licensing Fees, and Sale of Properties/Services. When the government fails to meet its obligations one of the three has to be enacted to bring in extra funds. That's all it can do.
Problems arise when dueling economic theories are enacted by the various political factions who run the government; the top two contenders are: The Mellon system--a longtime favorite of conservatives--stipulates that if you cut taxes and give the people money they'll spend the money on business which gets the economy moving and more wealth spreads around. In theory, more money will come in to the government from the new business generated.
The second economic favorite is the Keynesian System, in which the government deliberately spends more than it earns because an economy works best that way. Why? No one really knows. Practice, however, has shown that as long as there is a bit more going out than coming in, the economy moves faster.
The problems which have developed which have trapped Social Security in its present bind are almost ludicrous in hindsight. Ronald Reagan was a great champion of the Mellon Plan, but then he screwed the pooch by combining massive tax cuts with an incredible outlay of military spending. Result: bigger deficits. Many historians now believe that this was deliberate. Always a champion of little or no social spending, political analysts believe that Reagan deliberately engineered the deficits so that politicians would be forced to gut or even eliminate social programs in order to balance the budget. To do so would have been political suicide, so Congress resorted to raiding the Social Security funds to pay for other programs. This turned Social Security into a "pay-as-you-go" system, and the problem has continued until today.
Now, when George W. Bush began the wars in the Middle East, he repeated the mistake that Reagan did, slashing taxes and instituting all-out military spending. As happened in the 1980's we have huge budget deficits, but lack the revenue to pay them off. Compounding the problem is the fact that the bulk of the Baby Boomers are nearing retirement and will be asking for the return of the money they paid into the system. It's not there of course, having been used to pay for the older people who retired before them.
So, Taxes, Licensing Fees, and Sale of Properties/Services? Which will it be? There are nowhere near enough properties or services to pay for the millions of retirees. Licensing Fees? What could the Federal Government license that everyone would want, in order to pay for retirees. The only thing that comes to mind are drugs, and that's a political hot potato! The only thing that's safe (relatively) are taxes.
So, get ready to pay higher taxes, regardless of who wins the election!
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