Have a question for Homer, drop him an Email at Homer@cefe.org . He'd love to hear from you.

February 16, 2005

Homer: What did I do wrong now Kid?

Kid: Homer, you crack me up. It's not what you did, it's what you got rambling around in your head I want to get to.

Homer: Now what?

Kid: Social Security Homer, I need to know about Social Security. Is the program going bankrupt like the President says? Am I still going to get some? What do you think about this privatization thing, where we can put up to 4% of the money in a private managed account and give it away or will it away or whatever we want to do with it? Huh Homer, what do you think? I've got to know! With all this talk about how the idea of privatization will ruin it for us and that its a big risk and that we should not tamper with the system frankly is making me nervous. Perhaps they should leave it alone and if they run out of money raise our taxes. Yeah, that's it, raise our taxes!

Homer: Well, it sounds like you got it all figured out so what do you need me for?

Kid:  Because I don't know what to believe and I figured you would know.

Homer: Let's start with the basics Kid. First, two presidents, Clinton and Bush have told us the system is going bankrupt. In other words it will run out of money in about 40 years give or take one or two. This will leave the newest generation without benefits and the whole bunch of Baby Boomers like you Kid with probably have reduced benefits over the long haul, depending on how long you live. The generation that followed, the X'ers, your kids right behind you, do have a real threat of getting severely reduced benefits. Now that's the best I can tell you about the Fund being able to hand out the cash to those who are eligible. Old geeks like me don't have to worry. Most won't make it to my age but since Americans are living so much longer, the System is paying out more than they ever figured it would have too. Folks have just gotten a lot better at staying alive longer. When it started back in FDR's time, 15 workers contributed to one retiree. Right now it takes four workers to pay the social security benefits of one recipient. In 40 years that will be down to two workers.

Kid: How could they let this thing go bankrupt?

Homer: Back in the early 70's some voices were warning that the system was going bankrupt. More than one national commentator pointed out the program was soon going to be insolvent. In fact I would be willing to speculate that if the Social Security Fund was run by private investment managers, they would all be in jail for violation of the public trust and incredibly incompetent money management. Unfortunately, nobody listened. You know the old standard "it's not my problem". Well that 's what the Congressional guys did through the terms of six previous President's.

Kid: That's horrible.

Homer: A bit of an understatement there Kid.

Kid: What are we to do, how can we save the system for future generations?

Homer: The current privatization idea is a good one. People should be able to take a part of their contribution to Social Security and put it in private accounts. There is not a doubt in my mind that if structured properly, it will kick butt and outperform the rest of the fund assets controlled by the government by a minimum of 10  to one.

Kid: What kind of difference would that make in retirement benefits?

Homer: In round numbers about twice the benefit a retiree would have received under the old system. That little 4% set-aside makes a $2000 Social Security check in 2045 worth about $4000.

Kid: Then why all the resistance?

Homer: Stupid political party squabbling and gamesmanship. They'll get over it and hopefully do the right thing.

Kid: What if we left it alone and raised taxes?

Homer: It would still go bankrupt and Congress would have to severely cut back benefits, raise the retirement age five, and maybe even tack on10 more years to qualify for the benefits. In effect, all the "good ole' boys and girls" would be doing is prolonging the inevitable because they again passed off the problem to another Congress.

Kid:  It's a nightmare waiting to happen!

Homer: Yes indeed.
 

Kid: So what do we do Homer?

Homer: Call your Congressman. Let them know what you think and what you want them to represent for you in Washington. They need to know you want the Social Security Fund made whole again and the benefits, by one way or another, made secure.

Kid: Roger that Homer!

Homer: In the meantime Kid, don't wait for the Government to take care of you, keep putting money aside for your own retirement.

Kid: Where should it go Homer?

Homer: Can we talk about that some other time?

Kid: But Homer?

Homer: See ya' later Kid.

EDITORS NOTE: Look for Homer every week.

CEFE