The Myth that Government Can't do Anything Right

We’ve all heard the condescending retort to the proposal of any government program. The scariest words anyone can hear are, “Hi, I’m here from the government, and I’m here to help. “ Thanks, Reagan. We’ve heard this so often that it’s become kind of a “known” thing. Everyone knows the government screws up everything, right?

Look at social security. It’ll be insolvent by 2017, right? Here’s the problem: this isn’t true. Don’t believe me? Liz Pulliam Weston wrote an article entitled 5 myths about Social Security that addressed, well, 5 myths about Social Security. Reading the article proves that most of what we’ve been told by pundits and talking heads is just wrong. Sadly, I don’t think even they know or understand how it works.

From the article:

Here's how the Social Security Administration projects the timeline:

• In 2017, Social Security will begin paying out more than it takes in. For the first time, it will have to use the interest being paid on the securities it holds in order to meet its obligations.

• In 2027, Social Security would have to start redeeming the securities themselves.

• By 2041, Social Security would have cashed in the last security, and the system would have enough revenue to pay out only 75% of promised benefits. That percentage would drop over time if Congress failed to act.

What’s this about interest paid on the securities held by Social Security? Everyone knows that Congress has been spending the Social Security trust fund for years, right? Oops.

Three-quarters of the money that's collected in Social Security taxes goes right out the door again in the form of benefits to Social Security recipients. The surplus that isn't needed to pay benefits is loaned to the federal government to pay for other programs. In return for this loan, the trust fund gets IOUs in the form of special-issue, interest-paying Treasury bonds. The interest isn't paid in cash, however; the Treasury issues the fund additional bonds for the interest amount. In 2006, the fund was credited with more than $102 billion in interest; the total value of the securities is about $2 trillion.

So far, what we have is a program that might fail in 32 years if Congress doesn’t act in that time to save one of the most important and popular government programs. Why is it so popular? According to The Center on Budget and Policy Priorities, in 1997, the Social Security program lifts more seniors out of poverty than all other programs combined. “Of the 12.9 million elderly people lifted from poverty by the full array of government benefit programs, 11.4 million — nearly 90 percent — are lifted out by Social Security. “

Social Security is not a failure because it might be insolvent in 32 years. It’s a success because it meets the end goal of the program itself - poverty among the elderly has been reduced - from 35% in 1935 to less than 10% today. In fact, those repeatedly saying it’s a failed program often rely on it for themselves and their parents.

When it misses a payment, call it a failure. When it becomes insolvent, call it a failure. When 35% of the elderly are living in poverty again, call it a failure. Until then, what’s the balance of your 401K? Just enough to make sure that combined with social security it will be enough to sustain you? Or do you plan on living on only social security and have no retirement savings of your own? Not so "inefficient" when it's paying your bills, is it??