While the United States Congress assembles its manpower to struggle with the Social Security problem, it is very apparent to many of us just what the problem has been, continues to be at the moment, and will no doubt continue to be in the future unless proper action is taken.

Frank Bane, the original artist who was assigned the task of putting together the Social Security System, made it perfectly clear that the original intent of the program itself was to provide a means of bailing out the needy during the period of America’s Great Depression in the 1930’s; both its extent and its life span were clearly stated to be limited. Had America stuck to the original intent of the whole program, she would not now be in the mess she is in as regards the Social Security System.

The first injustice done the System was in presenting it to the public as a dependable and extensive means of everlasting support to the retirees in our society. History clearly indicates that the nation has come to rely upon it; there is existent a feeling that the 6.7o/o tax rate which is laid upon our income today—and will continue to grow in the future-and which is matched by employers, will suffice to take care of all problems which arise during retirement. So, rather than endeavor to prepare for one’s own future, many Americans have neglected to prepare for their “tomorrow” by proper investment techniques. Still others have not been able to do so because of the fact that government has taken so much from their incomes in the form of taxes, including that for Social Security. As a matter of fact, many not only have come to depend upon it, but many have regulated their working habits in such a manner as to get its fullest benefits with the least possible effort. Recently history also shows t hat, with the advent of many more women into the workforce, many will work just long enough to be eligible to receive benefits which will far surpass in dollars and cents during their remaining lifetimes what they have had to put into the Social Security System.

The original purpose of Social Security has also been completely forgotten and overlooked; in its place has come a multitude of purposes never even considered at its advent. Why is it called the OASDI? Originally, the “OA” was the expressed purpose of the program. Old Age was the prime concern; taking care of retired, elderly people was the goal. But notice what has been added. Survivor’s benefits have been made part of the program. While there may be some degree of justification for providing for the upkeep of one’s remaining non-working and non-contributing spouse, it surely helps to limit the financial success of the entire program. Then we have had added a Disability provision, a benefit which becomes almost immediately available to one who becomes disabled. And, of course, the Medicare and Medicaid programs are now a part of the entire operation. And all of this costs far more than the Social Security withholding tax can ever begin to handle. One of the major problems of the entire program, then, is the great amount of additional programs and services which have been injected into a system which originally had such a limited purpose in extent of coverage and time.

The result of such a tremendous growth in the system and reliance upon it by so many Americans has become a condition of financial bankruptcy, which now makes its survival dependent upon inter-agency borrowing and a continual rise in both the tax base and the tax rate. At the moment, over 36,000,000 Americans depend on a system which is so short of funds that the money simply flows from the pockets of workers who contribute to the program directly into the hands of ultimate beneficiaries. It never has a chance to stop anywhere long enough to bring about an expansion of the supply of needed funds. No business can continue to stay alive if it simply moves money from one pocket into the other and sees no investment profit in the process. Surely it would go bankrupt; and that is what the Social Security System has done.

What, then, is a possible solution to the problem? It is apparent to many of us that the politicians are aware of at least one possible problem because they have already taken at least one step in the right direction by allowing a tax break to those who are willing to invest their income in the IRA programs. The IRA programs permit your retirement money to stop along the way as it moves through time. Your money contributed will be held for a period of time, during which time it will be put to use by the business world; as money moves through the system it tends to multiply, creating more money, generating business, an d bringing in a profit, part of which is passed along to the original investor in the form of interest monies. A young person who invests even a small sum of $2000 a year for 40 years of his working life and receives 13o/o interest on his continued investment will reap somewhere around $1,500,000 and more at retirement time, enough to allow him to live comfortably for the rest of his life after reaching retirement age. And all of that is true because money multiplies itself and money will go to work for people if it is invested in the private sector of America’s economy. Instead of just flowing through a government agency from the worker to the retiree, it stops long enough along the way to pay for the future of the investor.

   

So, what is the answer to America’s problem as it relates to this bankrupt and misused program? What should Congress do to correct its flaws and get the American worker on a firm foundation for his “tomorrow?”

1. Congress should take away the “mandatory principle” of the Social Security system of payment, permitting people to invest their money in the more successful and profitable private sector of the business world. All Economists are aware of the fact that there exists the multiplier in the movement of money through the financial system, which means that money is “created” as money is invested and reinvested; and this is the only way in which the American worker will really build up a security system for the future which will satisfactorily meet his retirement needs over the extended period after his working life. By permitting people to put their money out where the profit is rather than into the dried-up “black hole” of the current system, we shall find they will have much more to live on in the future. 2. Rather than grant a $2,000 per year tax break for those who will put their money in the current IRA’S, Congress should give no income tax breaks for doing so, but they should permit all who wish, to invest all they wish and can in private IRA’S. At the moment, the worker who chooses IRA investments must also see a portion of his income withheld and put into the current Social Security System. Why not permit people to have the freedom to choose (a basic element of the free enterprise system) their own program, to invest all the savings they can in the program, and not have to give a portion of their hard-earned income to a system which is not working. The Free Enterprise system is based upon intiative and freedom without unnecessary government intervention; and Americans have always been able to fight through their own battles when they had to. And, in this matter of preparing for “tomorrow” they can do the same-if they are permitted to do with their money as they wish to do. So rather than a $2,000 tax break, why not let us keep that which is currently withheld for Social Security taxes and invest all of that money in the retirement system of our choice, one which is much more productive than the current one. Surely it will grow sufficiently larger over a given time than does that contribution which is simply passing from the hands of the wage-earner, through a government agency, and into the ever-growing pockets of recipients. 3. Why fight and hassle over a mandatory retirement age? It would certainly be a wiser move to forget that element completely. We are aware, of course, of the desire to move people out of the labor force and so create jobs for the newly-entering workers. But there is never a more invalid reason for doing so than that. In these days of high technology, there always exists the need for new kinds of jobs and workers. Mandatory retirement simply reduces the size of the work force rather than builds it up. Then, too, there exists the civil and political right called “freedom to work.” How can the privilege of working in any way be constitutionally taken away from the people? One needs only to communicate with the millions of successful business people and industrial workers to find out how unfair it is to force them to give up their right and enjoyment of making a good livelihood. Many who wish to go on working and make their own successful way through life have been forced by government through the Social Security program—to give it all up and sit around like dead wood for the rest of their lives, living on a meager income which is hardly sufficient to keep them going. Then, too, one needs only to look at America’s dwindling productivity growth rate to see how little progress is being made in that area today. Why not let those, who, all their lives, have known the challenge of being productive and have accepted it, to continue to work as long as they wish to and as long as they can do the job? Rather than sit and haggle over the matter of a forced retirement age, thereby taking away a person’s prideful satisfaction of feeling successful, why not permit the American worker to work as long as he can and wishes. Then everyone will benefit, even the government, since its tax base will continue to grow and it will receive higher revenues rather than have to pass them out to people who choose to work on and know the feeling of self-sufficiency and success. 4. There is no question but that the transition of the Social Security System from its current failing variety into that proposed will be most difficult. America has blu ndered along with the current one since the depression days of the 1930’s, misusing and overusing it far beyond its original purpose and intent. Now the nation is locked into the system and it would be most difficult to unlock ourselves from it. However, the solution does not lie in Congress sitting around and beating a dead horse or in continuing to feed an overstuffed system. Congress must begin to develop a completely, new, private-sector-oriented . system for people. It has even been suggested that, if a government mandate is required to be certain that all people take part in preparing for their retirement days, then people will be mandated to invest their money in the private sector of American business. The significant truth is that there is much more potential for monetary growth in the private sector than there is in the government (public) sector. So now is the time for the transition to commence. As newly-entering workers come into the job force, why not permit them to choose what proportion of their income they wish to place in their own retirement fund? And as they move up in the areas of business and industry, and as their incomes grow, let them place all of it in a more profitable place where-over time—it will provide a larger income fo r their “tomorrow.” By putting their money in a good investment, including that which they now must put into a failing Social Security system, they will be prepared to take care of their own futures. Gradually, the current system will die out and a more successful one will take over.

Surely there will be problems which must be faced during the period of adjustment. It is certain that the attitudes of many who have become reliant on government services will have to change. But this will all happen over time and America will find that the new system which permits Americans to be productive all of their lives, which is structured on the Free Enterprise system, which uses the ability of the private sector to invest and reinvest successfully, and which presents American people the challenge to take care of their own today and “tomorrow,” will do a much better job than the current, overloaded, misused, and less dependable one. It will take time to accomplish a turnaround in our Social Security system, but it can be done. Our American Economic System of Capitalism places great emphasis on the rights of private initiative and freedom to use our own skills and property, and these are the elements which have made us successful. Perhaps the Congress should recognize that the secret of winning this ball game lies in their passing the ball back into the hands o f the private sector and letting the people themselves solve their own problem their own way-as they have done in the past. The ultimate solution to the whole matter lies in our willingness to accept and act upon those economic principles which dominate the Free Enterprise system and which will, if left alone, always manage to correct flaws which man has placed into the system.

James Shook is an economist and teacher in Phoenix, Arizona.