How Social Security Works

Social Security is lauded by liberals across America as a great accomplishment, and a signature accomplishment of the American social safety net. It has become a third rail of American Politics, where any attempt to change it gets the AARP and other senior advocacy groups railing against it as betraying the working class and then their members kick out the politicians who propose changes which keeps conservatives from attacking it and others from criticizing its flaws. Since turnout among young people is routinely low and senior usually vote in large numbers this protects the program from any changes that would benefit younger people or the nation as a whole.

I am a progressive, I want to have a public option at a bare minimum for health care, ideally expand the number of people who can enroll in Medicare and Medicaid, allow Medicare to negotiate for lower drug prices, and increase equality in access across states. I want to see an investment in education for all students and help bridge the rich/poor funding divide in our schools which is reflected in resources. Creationism should NEVER be taught in science classrooms. I use and respect the science method and its findings, and change my views to fit its findings. I want to build a massive increase to inner-city mass transit and inter-city mass transit to reduce our reliance on cars and make our cities more liveable. I believe inner-city mass transit should be free to the rider. We need to have programs to help the homeless become housed and stop incarcerating drug users and the mentally ill.

I also want to kill Social Security Old Age Insurance. Yes, that's right. I want to kill OASI and replace it with a basic minimum income for people of all ages. First of all, here are the reasons why I want to kill OASI.

The biggest reason I want a radical reform to Social Security is because OASI always gives less than 100% back for the contributions people make. For the poorest Americans they receive 90 cents on the dollar for Social Security contributions up to $856 a week ($21.40/hour or $42800 per year) and then it goes down from there. These earnings are so low that putting a worker's social security benefits into bonds would yield more money. SSA and proof

I would like to have a universal basic income replace OASI. For those people who have paid into Social Security we would still get the benefits we have bought into, but for workers younger than me they would never pay into the fund. In 2015 the fund stood at $2.857 trillion dollars. At the same time OASI cost $740 billion for the year. The first issue is the investments of Social Security are not getting a good return on their investment, and we should allow the Social Security Administration to seek out any investment they deem appropriate so that we can get a better return on our investment. We only got a 0.9% return on the Investments the SSA has been able to make. If they bought longer-yield bonds from the Treasury we could get a much better return for our money and it could be enough to make the program self-sufficient at this point. The American people lost 30 billion dollars in Social Security Trust money last year because of this decision. Over a long period of time the difference of how much money the trust fund should have has become very large. With an aging population and hundreds of millions of people betting on Social Security being there for them when they retire this has become a very big issue where the Trust Fund is barely making any more money compared to the 1980s and 1990s which has made it stagnate in comparison to the amount it should be making today. history

So, if I had my druthers, I would have Americans stop paying OASI taxes, allow the trust fund to be invested freely by the Administration so that OASI can be paid out of the interest its massive reserves make every year. People who currently are owed Social Security benefits will be paid out of the interest which will be enough to cover the difference. Disability and SSI will not be changed.

The replacement of Social Security OASI will then be a Universal Basic Income. This will be a direct stimulus to poor economies across the country. People can use this money in any way they want. I would give every American $5000 when they file their taxes as their UBI every year. The payments will be given to the person as cash, and they can do whatever they want with it.

If people stop paying social security taxes and instead invested their UBI into 30 year government bonds averaging 4% annually over the long run will yield a bigger benefit to people than OASI provides. A $5000 basic income will have the benefit of people being able to invest into interest bearing assets which will grow into a far larger sum than Social Security will ever provide in a lifetime. The other benefit to Basic Income is it will help young people get a foothold on life by being able to purchase what they need to get their lives started, versus people who are in their senior years and have had decades to invest for their future. I would rather get people started on a good foot than step in at the last moment. Another advantage is if someone dies soon after retiring than the money that they have paid into Social Security will not be recovered by their families, while having assets helps families accumulate wealth. If more families had access to that then we could see less inequality. It also will not matter as much how much money your family has because young people will have the funds they need to start life on a good foot.

The total cost for my Basic Income would be $1.5 trillion, which would and in part replace less efficient programs. We spent $1.3 trillion on pensions this year, and most pensions do not perform as well as a strong index fund, and many cannot be inherited which is essentially stealing from poor and middle class families. I would rather spend money on getting everyone on a good foot to the point where people can take care of their own retirement which then will be inheritable and not transferred back to the rich. Most people I know who have financial stability have no formal training in economics. These plans are accessible if people are willing to look and have basic math skills.

One final note on my counter proposal is that the $5000 per person Basic Income would go to adults in cash to their bank account (or cash if they are dinosaurs) and it is theirs to use as they want. However, for minors half of their money will go to their legal guardians, and half of it will go into their trust fund. It will receive interest over time like how I want to change the OASI trust fund, and when they turn 18 they will receive the sum in the way they choose. This money would come out to be around $50,000 if it didn't collect interest, but if it collects 2% interest will be around $62,000 and $75,000 at 4% interest. This would make a big difference for young adults with less supportive families and make a big impact for people when starting families, particularly for those who would invest what they don't use. Everyone would have the opportunity to start their own business, take a risk, and our economy would grow significantly by the increased spending in poor areas. This positive shock to demand will create the opportunity for new businesses which will create new jobs and a better economy for everyone.

The funding for the basic income will come by treating capital gains as regular income. I have already written about that here. This will be an overall better safety net for American from which everyone will ultimately benefit.