Wednesday, July 6, 2011

Social Security is how we AVOID using welfare.

Social Security is at heart simple.  But to get the votes, we had to add a bunch of window dressing.  This let us convince people that it was something it was not. 

How American Social Security works:

1.  We take money in from working people.

2.  We use this money to fund current retired workers.

It is an INSURANCE PROGRAM.  It was set up to be absolutely, 100% sure that older Americans who worked all their life will not starve.  Specifically, it is a kind of Annuity that kicks in after a certain age, with the benefits in part determined by how much you contributed.  It also has some extra features that make it more complicated.

Here are things it is not, and why people think it is.

First, it is not a retirement plan.   Yes, we give more money to people if they paid in more.   But the amount you pay in, even if you got the best interest rate available, would NEVER pay for what you get out.  Also, there is a maximum you can get.  People think it is a retirement plan because of four reasons:  1.  the wealthy successfully lobbied to have a cut-off to their payments ($106,800 for 2011), if you work for  2.  the amount you earned in your working career affects your payout.  Also, you need to have worked long enough to earn the credits.  A minimum of 10 years of work (40 credits, at - in 2011 - 1 credit for every $1,120 of cash payed in taxes),  3.  They set up an early retirement and delayed retirement options that decrease or increase the amount of money you get..  As of 2011, full retirement age is 67 (if you were born after 1960),   Early retirement is at 62, and Delayed retirement (upto 70), increases payments.  4.  Your employer contributes

Second, it is NOT a welfare plan.   We don't pay anything to you if you never contributed to the system, nor is it in any way need based.  You don't get more if you need more, only if you earned more.  True welfare plans only go to the poor, not the rich.  They also pay out even if you never worked at all.    People think of it as a welfare plan for four reasons:  1.  It keeps you out of the poor house, as it was designed to do, if you make bad decisions (either bad retirement planning or bad life decisions) .  2.  It gets paid from current funding, rather than past funding.  3.  It is connected to certain actual welfare plans that are NOT paid for out of Social Security (Supplemental Security Income).   4.  It is a required program, so everyone must participate. 

So, why is it an Insurance plan, and why isn't it obviously so.

All insurance is a some kind of bet.  Usually the bet pays off if something bad happens.  In effect, Fire insurance is a bet that your house will burn down, Flood insurance a bet that your home will flood, etc.   It makes sense because if the horrible thing happens, you will need the money.  The insurance company makes a profit from all the people that don't have horrible things happen paying a little bit more than those that do have the horrible thing happen.

Social Security is a bet that you a horrible thing will happen - you will live long enough to have trouble working. That is why some people don't understand it - they don't understand that living too long is a bad thing.  Mainly because they have all grown up in a world with Social Security so they never saw the evils of old people that worked hard all their life, perhaps with good middle class jobs, living on the street and dying broke.

This particular kind of insurance is called a lifetime annuity, with a special clause to pay out to widows and orphans if you die early. 

The thing about insurance, is that it pays off for the flood even if you have enough life savings saved up not to need it.  If Donald Trump gets into a car accident, his insurance company doesn't say "Sorry sir, but you can afford to fix it, so we won't pay off."   Nor does the state say "Donald Trump, you are so rich that we won't make your buy car insurance."  No.  The state requires that everyone with a car, no matter how rich, gets car insurance.  We need to require everyone, because the entire idea is to protect everyone, even the people that made stupid decisions - and the stupidest decision is not to participate in the insurance program.  

We don't need another 'retirement plan'.  We have those - they are called Pensions, 401K, IRAs, etc. etc.

We don't need welfare for the elderly.   If someone choose not to work their entire life, they deserve nothing.  Social Security is what lets us protect the good, hard working folk WITHOUT protecting the worthless SOBS that never worked.

The people that claim Social Security is welfare want to remove Social Security and set up an ACTUAL welfare program (sometimes funded by churches, sometimes by the government.  They are hypocrites to a huge extent.

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