Government Based Upon Natural Law - (Part 13) - Retirement and Social Security

The History and Future of Social Security

Social Security is a poorly planned system that is not economically sound, and is unfunded.  The current Social Security tax rate is 12.5% and this money is used to pay current retirees; thus none of the Social Security taxes paid by an individual are actually invested for that individual.  This is why it is considered unfunded.  Because of this and because of the aging population that is occurring all over the world, Social Security benefits are becoming an increasingly large inhibitor of economic growth, and are taking up a larger and larger share of federal spending. In 2009, it has been estimated that Social Security and Medicare are underfunded by around $50 trillion.  This means that if the benefits remain the same, and the FICA (Social Security and Medicare) tax rate remains the same, an additional $50 trillion would still be needed.  Any company that had such a retirement program would rightly be prosecuted.

To show how badly out-of-balance these programs have become, between 1966 and 2006, Medicare and Social Security grew from 16% of the federal budget to 40%. (Defense spending declined from 43% to 20% of the budget during that period.)  By 2050, spending on Social Security, Medicare, and Medicaid is estimated to take up the entire federal budget, if the budget were to remain the same proportion of Gross Domestic Product (GDP) as it is today.  (This does not even include the interest on the federal debt, which is increasing even more rapidly; it is projected to be three times the entire GDP by 2050.)  Obviously something will have to be done, and it will not be pretty.

Even worse, as of 2010 or so, people are paying more into Social Security than they, on average, will get out of it.  For instance, if a person turned 65 in 2010, they will have paid into Social Security about $588,000 and will only get $555,000 in benefits.  And these figures get worse every year.   Thus, people are getting a negative return on their 'investment'.

Most people are not aware that when Roosevelt and Congress started Social Security, the FICA tax rate was only 2%, and even then only those who earned over the median income paid into it.  Also, it was only intended to supplement one’s retirement.  Now, virtually everyone who works pays into Social Security at a rate of about 12% of income, and it still is only intended to supplement to one’s retirement.  This is truly pitiful and unbecoming of a great country. 

Retirement Planning

In a system based upon personal responsibility, individuals are responsible for their own retirement funds.  It would be wise to invest at least 10% of one’s income into a retirement plan.  I would recommend that children be taught in school the importance of saving for retirement from their very first paycheck.

To make the transition from our current system, we might require individuals to invest this money, although this would still slightly violate the premise of personal responsibility.

(As an aside, another 5% or so should be used to purchase long-term care insurance, and to purchase disability insurance as well.  Surprisingly often, many people will at some point become disabled, and/or need long-term care).

This 10% of one’s income would be invested in one of a number of government-approved investment companies.  Such companies would have to meet certain strict standards, as determined by the government.  These funds would be held in a segregated account in the individual’s name, so that such savings are immune from the solvency of an employer or the investment company.  This is similar to many retirement plans many States use for State employees.

To get an idea of how much money a person could have at retirement, let’s assume that the person works for 40 years, and has a starting salary of $36,000.  Let’s also assume that the person only gets a raise equal to the rate of inflation, so that they are essentially making $36,000 in today’s dollars for their entire working life.  This is a rather conservative assumption, since the median income of men who worked full time in the U.S. in 2007 was about $45,000.  The final assumption is that the entire amount is invested in a stock-index fund that mirrors that entire stock market.  Over any 40-year period since the modern stock market began in 1920, the stock market averaged a gain of at least 10% annually.

Whipping out my financial calculator, and investing $300 monthly (10% of the $3,000 monthly salary) for 40 years, earning 10% per year, gives almost $2 million in today’s dollars.  (The actual amount would be the value of $2 million of today’s dollars 40 years into the future, a much larger figure.)

Once you retire, you can safely take out 5% of this $2 million each year without reducing the principle, so this would give an income of $100,000 per year for the rest of your life!  And you would never have to worry about running out of money.  When you die, the $2 million could be willed to one’s spouse, children, charity, etc.

Imagine how much better this is than the current Social Security system, which takes over 12% of your income, and gives you about $25,000 per year for life at retirement.  This is what happens when government takes charge of your life.

Even better, we would no longer need to save additional money for retirement as we do now.  For instance, I work at the University of Texas at Dallas.  I pay 12.5% of my income (between me and my employer) into Social Security.  In addition, I am required to pay 15.5% into my retirement plan.  Under the plan I gave above, it would only cost 15% of one’s income (which includes long-term care and disability insurance as well as retirement).  That means I’d have an immediate additional 13% of income to spend.  Would you like a 13% raise?

Conclusion

We need to immediately implement a retirement program as described above.  At the same time, we need to phase out the fiscally irresponsible and damaging Social Security program.  But this needs to be done without harming those retired or near retirement.  This will be expensive to do, but will only get more expensive the longer we wait.  It is likely that the best way to make the transition is to require individuals to put 15% of their income into their own retirement/disability program, and yet still pay FICA taxes until almost everyone has their own well-funded retirement program.  This will take decades, but it took us decades to get to where we are now.  As usual, the piper must always be paid.

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Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.

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The Top Five Lies and Half-Truths Found in Movies

Movies help to define and influence our culture.  But movies frequently reflect lies and half-truths about what is good and what is bad for humanity, and many do so in such a manner as to degrade our culture.

What are some of myths, lies, and half-truths perpetuated by movies?

1) Myth: Nuclear power is dangerous and has caused untold harm to us and the Earth.  Radioactivity has caused an untold number of mutations to humans, and to plants and animals.  Many movie monsters are the result of mutations due to radioactivity. 

The Reality: Nuclear power provides the safest, least- polluting, baseload of energy that mankind has even known.  Not a single American has died as a result of radiation from a commercial nuclear power plant.  And this includes Americans on nuclear-powered aircraft carriers and submarines.  This level of safety is unheard of in the history of humanity.

Another major advantage of using nuclear power is that we would no longer need to depend on countries hostile to us.  For instance, the most likely nuclear fuel in the future will be Thorium, which the U.S. has plenty of.  Some are estimating that we have over a million years of nuclear fuel remaining.

Nuclear wastes?  Not to worry.  The new reactor designs use the energy in current wastes to generate even more energy, while eliminating most of the wastes.  And when car batteries become more efficient, we can charge them with electricity generated from a nuclear-power plant, and eliminate autos as a source of pollution.

What about the nuclear-reactor problems in Japan?  Well, Japan had a (1-in-every-400-year) 9.0 earthquake, resulting in devastating tsunamis, which killed well over 20,000 people.  Some of their 40-year-old nuclear reactors were severely damaged, and released some radiation.  Of the 20,000 people killed, how many were reportedly killed by radiation?  If you've read the hundreds of hysterical articles about the damaged nuclear reactors, you'd think the answer would be thousands.  But as of 2012, the answer is -- you guessed it -- 0.

Would you like to scare 95% of the American population?  Use the work "nuclear" in a sentence.

There is a source of radiation that kills thousands every year -- the Sun.  These are mostly deaths due to skin cancer.  We must do something about that pesky Sun.  We do need about 10-15 minutes of sunlight a day to get our vitamin D.  But if you want to minimize your chances of getting skin cancer, after your few minutes in the Sun, head to a nuclear power plant.  If they let you in, you'll be safe from any radiation there.

2) Myth: Businesses are bad.  They destroy the environment, they make the rich richer and the poor poorer.  Businessmen are unscrupulous and only care about how much money they make, and how to increase the value of their stock.

The Reality: Sure, some businesses and some businessmen are bad, but this can be said about any group and about many individuals and is just a reflection of the fact that we humans are flawed.  But because we allow free-enterprise more than most countries, we have provided an environment in which our best people created the best products in the world, because they can profit from this.  Americans created electric lighting, the telephone, cell phones, computers, affordable cars, the Internet, GPS, YouTube, the polio vaccine and other wonder drugs, indoor plumbing, IBM, Google, Intel, and thousands of businesses whose products have made each of our lives better.  Without privately-owned businesses, we'd be about as prosperous as Cuba and North Korea.  And remember how well the Soviet Union worked out.

3) Myth: We are destroying the Earth.  Humans are responsible for most of the pollution and global warming that are causing this destruction.

The Reality: There is nothing humans can do to destroy the Earth.  The huge asteroid that killed off the dinosaurs and many other species around 65 million years ago did more harm than we could possibly do.  The Earth could not have cared less.  And yet many paleo-biologists believe that the death of the dinosaurs allowed mammals to flourish, eventually allowing Homo sapiens to flourish.

Surely we would all like to create less pollution, to grow more organic foods, to conserve more, etc.  And other entries in this blog tell how we can do this.  But none of what we're doing is "destroying the Earth."

Furthermore, prosperous countries tend to be the least- polluted ones, because they can afford pollution controls.  How many movies that seem to be concerned about pollution point that fact out?  Instead, prosperous countries and prosperous people are ridiculed and called greedy.  Want a cleaner Earth?  Do what it takes to be more prosperous.

As one of many movie examples, in the latest remake of The Day the Earth Stood Still, the main alien, played by Keanu Reeves, said the humans must be wiped out because there are not that many habitable planets in the galaxy and his galactic alliance couldn't allow humans to destroy the Earth.

Keanu didn't explain how humans were destroying the Earth.  This was fortunate, because his explanation would have been nonsensical.  Presumably, it was related to human pollution and human-caused global warming.  Such things could kill some humans and some species, but would not come close to "destroying the Earth."  

I can't imagine what his galactic alliance was thinking, or, more to the point, what the movie's writers were thinking.  Couldn't this galactic alliance have shown us a way to generate inexpensive, non-polluting energy?  Instead, they decided to destroy the entire human race, just so some other alien race might use the "clean" Earth in the future.  (Keanu Reeves did relent and stop the genocide of the human race, but that did not change the premise of the movie).  There is so much nonsense here, one could make another movie about the irrationality of this movie.  For instance, suppose that humans did stop polluting (or whatever was bothering Keanu)?  This would do the aliens no good at all, since humans would still be occupying the Earth, and not the aliens.  So really, if the aliens value the Earth so much, the rational thing to do would be to destroy us before we can defend ourselves.  Of course, they would accumulate some very bad karma doing this, but what the heck?

We'd be much better off with a galactic alliance headed by Darth Vader.

How can a movie that makes those who intended the genocide of humanity seem like the good guys?  Only a movie made by those who value snails and whales more than humans.

4) Myth: The rich are bad.  They are greedy.  They take away jobs from the rest of us, have a huge "carbon footprint", and will certainly not get into Heaven.

The Reality: Name a country with very few rich, and you've just named a country where almost everyone is poor.  Most people who are rich earned their money by starting a business (as opposed to inheriting their money).  These businesses create millions of jobs that create prosperity for the rest of us.  Microsoft, Intel, Facebook, and Google are just a few of the companies started by individuals who are now rich.  We should be happy for them, and thankful that we live in a country that protects people's right to start and profit from a business.  Countries that don't protect such freedoms are now mostly former countries, such as the Soviet Union and its satellites.  Those countries still around that don't protect such freedoms will soon be former countries themselves, unless they start to change and allow their citizens to be free to live in peace.

Of course there are rich individuals who do bad things.  For instance, someone who becomes rich but does not pay his employees their fair share of what they have produced is going to get some bad karma.  Not as much as the aliens who destroy all of the intelligent life on a planet, but bad karma nonetheless.

Movies that show disrespect to "the rich" help to create class envy.  And nothing good comes from envy.  It harms a person physically, mentally and spiritually.  And it even makes them less likely to become prosperous, because an envious person can blame the rich for their woes, rather than take responsibility for their life.  And it allows our politicians to play "the-rich-are-bad-and-are- responsible-for-your-misery" game.  Instead, our politicians should be telling us what they would do to help increase the prosperity for all good Americans who are willing to work.

5) Myth: There are few religious people in the United States.  Few mention God, few pray, and many make fun of those who are religious.

The Reality: Recent polls have shown that about 80-85% of Americans believe in God.  But check out almost any movie you can think of.  Rarely is God even mentioned, and even more rarely is someone shown praying.  An alien who tried to deduce what humans believed just from movies would deduce that most of us were atheists, and and that those who were religious were irrational.

The disparaging of those who are religious is a very dangerous trend.  A country that is not predominantly religious will eventually get into trouble.  The biggest mass murderers in history, such as Stalin, (former president of the U.S.S.R.), Pol Pot (former president of Viet Nam), Mao (former chairman of China), Hitler (former dictator of Germany), and Tojo (former emperor of Japan), were not in the least concerned with how God felt about what they did.

And if God is not the source of one's morality, then usually one looks to government for guidance and to solve one's problems.  And it's abundantly clear how well that works. 

The founding document of our country, the Declaration of Independence, states that our rights come from our Creator.  If one doesn't believe in a Creator, then our rights are up for grabs.  No thanks.

 

Conclusion: Many movies get released that have some major inaccuracy that contributes to our country's debasement or lack of knowledge.  And yet movies, like most other things, can be used to uplift or to degrade.  There are many good movies out there that leave one with a desire to make things better, that cause one's soul to soar.  We can only aspire to creating a culture in which these will dominate the industry.

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Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.

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