Privatizing our Social Welfare

Privatizing Social Security, Medicare, and Medicaid

First of all, what does privatization entail? The privatization of these welfare programs would be completed through the use of a personal account, where your “taxes” would go. Instead of the government charging you taxes for Medicare or Social Security, any money that you would have contributed would be redirected towards an account that will invest the money for you. Like pension plans or state employee plans, investment is the only way to keep welfare programs solvent.

The problem with Medicare and Social Security today is that these are all programs that do not invest proceeds. Any money that you pay as Medicare or Social Security tax is sent to pay out current beneficiaries and any surplus is redistributed to pay off other government deficits. Rick Perry, the frontrunner in the GOP primaries, called Social Security a “Ponzi Scheme” and, frankly, I can do naught but agree with him. Merriam Webster defines a Ponzi Scheme as “an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.” Let’s look at how Social Security works today. The early investors (those who are currently receiving benefits) are being paid off with money put up by later ones (that would be the people paying taxes now) in order to ensure more and bigger risks (this would be a growing beneficiary list). How is Social Security, in any way, different from a Ponzi Scheme? Medicare is the exact same thing. The surpluses that the program ran in the past was redistributed to cover for our deficits, and the only thing left in the Medicare trust fund were a bunch of IOUs from the American government. In addition, there’s no way that Medicare/Social Security/Medicaid can afford to continue paying out the amount that it’s been promising. When Social Security was established in 1935, and Medicare in 1965, nobody expected very many people to live on it for a long time. When Medicare was established and the eligibility boundary set at 65 years, the average life expectancy for an American was also about 65 years. Today, it’s 78.7 years. The creators of our social programs never expected people to live for 14 years on welfare and Social Security. They expected most people to die off. To the contrary, we now have retirees who are now on these programs for twenty, thirty, even forty years. Because of this, the number of taxpayers per beneficiary is also decreasing. We no longer have twenty taxpayers for every person taking Medicare. Now, it’s 1.9. The rates that were created in 1965 are no longer sustainable, and the surpluses that these programs have enjoyed for nigh on forty years have also expired. The Ponzi Scheme is about to collapse.

The only way we can fix this is through privitazation and public options. What this means is that people should no longer be forced to pay taxes to Social Security and Medicare that do not earn interest and are unsustainable over the long-term. Instead, we have to give people the option of diverting their Medicare taxes to a personal account that will be invested in the major index funds and bonds. Even with this conservative form of investment, workers can expect to achieve 4% gains annually, far more than the nothing we earn with our money in the hands of the government. In addition, as our money compounds, we earn more and more, with the end result being enough money to purchase private health insurance. People who retire at age 65 with personal accounts will then fund their insurance with money from their personal account. This is incredibly important because it once again puts power back into the hands of the consumer. By giving the consumer a choice, competition between insurance companies will naturally drop prices and allow for the consumer to purchase the best product, at the best price. Similarly, those who chose the personal account option for Social Security will have their money paid back to them in a reverse mortgage like fashion for forty years. Any money that is left over when the beneficiary dies will be passed on to the personal account of family members or heirs. In this way, we’re making it so that we can have a sustainable method of healthcare and Social Security that completely empowers the worker himself, not the government.

In addition, doing so would also cut deficits and reduce the federal debt. The problem with Medicare and Social Security today is that they no longer run surpluses, but rather run deficits. Any deficit that they run only adds on to our debt burden, and their deficit is certain to increase in the future as more and more people retire and fewer die. By creating a personal account or a public option, we allow these people to transition away from Medicare and Social Security, taking off the debt burden of these programs.

In conclusion, the privatization of Social Security is a necessary and essential component to whatever road America decides to take. By privatizing these social welfare programs, we empower the consumer, give them more flexibility, and also reduce the debt burden on our government.