End Social Security as we know it? You should hope so

Actually … you need to feel a little sorry for the Democrats as they try to make their case for the reelection of Barack Obama. They have absolutely no record of accomplishment to run on. Obama has been a complete failure by any metric.

Here’s a new drinking game for you – and the longer Obama remains in office the more we need some good drinking games. Just watch any news interview program and wait for the panel discussion with the ubiquitous “democratic strategist.” At some point in the discussion the prog will start taking about Republicans “wanting to end Social Security as we know it.” When you have nothing going for your side try to frighten the old folks.

I don’t think that any GOP candidate has done a good job of putting this point across (though Perry tried last week). For people who are now eligible for Social Security benefits and people who are nearing retirement age — say those over 55 — there is simply no reason whatsoever for them to worry about their benefits either being reduced or stopping altogether. It’s just not going to happen. There is no Republican candidate out there who would allow that – and the voters would make sure it doesn’t happen. Those who talk of Social Security reform are looking into the future – not the present – and the future is where the collapse of our Social Security lies.

In 1981 the Galveston County Commission made a proposal to the county workers to ditch the Social Security system and go with a private plan they called the Alternate Plan. The county employees voted on the issue amidst great pressure from unions to turn it down and remain with Social Security. The Alternate Plan won, but not by a wide margin. The Social Security Administration was notified that Galveston County employees would no longer participate, and the private alternative was instituted.

Financially, nothing really changed with the county employee paychecks. There was still the 6.2% deduction from every paycheck for the employee’s contribution to the plan. The county still paid a matching contribution — actually a bit more. That’s where the similarity to Social Security pretty much ended. Galveston County hired a financial planner to set up the plan. The goal was to be a good replacement for Social Security .. with better benefits guaranteed. Every worker had his own account and account balance. The money was pooled into a private sector investment account with a guaranteed minimum rate of return.

So … now the payoff. How are the employees of Galveston County, Texas doing with their Alternative Plan vs. other Americans who were not lucky enough to get out of Social Security?

First … let’s deal with retirement income.

If you’re a low-income worker making about $26,000 a year when you retire you get about $1,007 a month from Social Security. Make that $1,836 per month under the Galveston plan. That’s a difference of $829 a month or almost $10,000 a year. Are you low-income workers out there glad you were able to keep Social Security “as we know it” and not become a part of a plan like Galveston County’s? Yeah — that’s costing you ten grand a year.

What about middle-income workers? The difference there is $1,540 from Social Security and $3,600 from the Alternative Plan. The monthly difference? Try $2,060 per month or almost $25,000 a year. That’s your penalty for letting the Democrats demagogue any attempt to privatize Social Security over the years; $25,000 per year. Don’t you just love your Democrat masters?

And now for the high-income Galveston County workers. These are the people who max out on their Social Security taxes. They get about $5,000 to $6,000 a month from their Galveston Plan vs. $2,500 from Social Security. That’s a difference of between $2,500 to $3,500 per month or $30,000 to $42,000 a year MORE from the Galveston private plan than from Social Security.

There’s something else we need to cover here. The death benefit. If you’re part of Social Security your survivors get the incredible sum of $255. That ought to pay for one spray of flowers for your casket, not much more. After that $255 payment the rest of the money you have paid into Social Security is pretty much gone. Wow! What a deal! But what if you’re part of the Galveston County Alternative Plan? You’re survivors don’t get the princely sum of $255. They get four times your salary tax free. There’s a maximum of $215,000. So there you go! Under Social Security, $255. The private plan? Four times your salary.

There are two other counties in Texas, Matagorda and Brazoria, who pretty much did the same thing that Galveston County did — pull out of Social Security for a private plan with similar results. So … you might wonder why more government entitles haven’t done the same thing! With spectacular results like this you would expect government workers would be clamoring for a private plan of their own. Well you can blame that on the Democrats too. They saw these local government entities bailing on their precious Social Security system and passed a little law in 1983 shutting that door for good. To put it just a bit differently — in 1983 the Democrats erected an economic Berlin Wall around Social Security; not to keep people from getting in on their wonderful ponzi scheme, but to keep people from getting out.

So … for all of your senior, wizened, wrinkled citizens out there just waiting to cast your votes for Obama next year so that you won’t lose your precious Social Security. Just think about the statistics you’ve read above.

A budgetary ‘makeover’

It’s understandable that people are excited about the ABC-TV show ‘Extreme Makeover: Home Edition‘ coming to our hometown on the heels of another home built in Sussex County, Delaware. But this excitement comes at a time when Wicomico County is strapped for cash, much as it’s likely the family selected for the new house has their own financial issues to deal with.

According to a resolution passed by Wicomico County Council last week, the county could be holding the bag on over $30,000 worth of fixed and estimated expenses – a far cry from the numbers claimed elsewhere in the local blogosphere, but quite in line with what other communities have experienced. The proof is after the jump.

Read more here.

A lesson for the tax the rich crowd

Here’s more ammo for you when discussing taxes with your lib and prog friends or co-workers. Most of them cannot seem to wrap their brains around the idea that if you lower taxes, you actually generate MORE revenue. Instead, they preach this “tax the rich!” mantra because it sounds cool and it satisfies a primeval quest for revenge . Unfortunately for them, the numbers are not on their side.

Now, let’s talk about capital gains taxes. These evil taxes have come to the forefront of debate as of late because of Warren Buffett. I’ve explained how Warren Buffett does not pay a lower income tax rate than his secretary; he pays an entirely different tax – capital gains tax. And yes, the rate of capital gains is lower (for some) than income tax rates. But all that might change, if Democrats get their way. It will be just another way for them to nail those evil rich investors! From Forbes …

In 1997, Congress was considering a cut in the capital gains rate from 28% back down to 20%. The Joint Tax Committee (JTC) estimated that as a result revenues would increase by $7.8 billion from 1997 to 1999, but the tax cut would produce a loss of $28.8 billion over the following 7 years, for a net loss of $21 billion over the 10 year period.

The actual numbers after the tax cut was passed showed an increase of $84 billion over the pre-tax cut projections for 1997 to 2000. Despite an almost 30% cut in the rate, capital gains revenues rose from $62 billion in 1996 to $109 billion in 1999.

Similarly, when Congress considered cutting the capital gains rate again in 2003, from 20% to 15%, the JTC estimated that this would cause a loss of revenue of $5.4 billion from 2003 to 2006. But after Congress passed the tax cut, capital gains revenues increased by $133 billion during those years, as compared to the pre-tax cut projections. As Dan Clifton of the American Shareholders Association said, “There is no excuse for this $138 billion error.” Capital gains tax revenue doubled from 2003 to 2005 despite a 25% cut in the tax rate.

Wealth envy is a political scheme used to buy votes. It should not be dictating economic policy.

%d bloggers like this: