Why is Resident Bush going on about Social Security all of a sudden? He's never cared much about any other social program; what now possesses him to become the Great Saviour of everyone's retirement funds? The dopey thing is, he hasn't really proposed anything yet. He's only talking in generalities about privitization and hasn't told us what he'd do, specifically.

What he is saying is that Social Security is in crisis, that it is going bankrupt in 2048 because there are not enough new workers paying into it. But 2048 is so far off! Does the situation merit calling it a crisis? In fact even that bastion of conservatism, George F. Will says "that is an exaggeration." (http://www.washingtonpost.com/wp-dyn/articles/A22532-2005Jan19.html) But wait, like Bush, The Heritage Foundation also predicted way back in 1998 (http://www.heritage.org/Research/SocialSecurity/BG1176.cfm) that Social Security would go bankrupt by 2032, even earlier than what the President said.

WAIT A MINUTE! 2032!? Less than seven years have passed since that report but the due date for bankruptcy has gone up by, ahem, SIXTEEN years! Now that's the kind of bankruptcy problem we all wish we had, one that keeps getting further away.

What kind of fuzzy math are we dealing with here?

Now it is true that Social Security has a problem because retirees are living a lot longer than they did back in the days of FDR, plus we are having a lot fewer babies than before. But small adjustments in payments-in and payments-out have kept the system in the black. It should continue in the black until at least 2018. That's hardly a crisis; we don't need a fundamental change.

Social Security is designed so that workers are guaranteed a small pension in their old age, a little something that can be depended upon. Is it enough for the average person to live on, especially with medical bills? Heck no. You are supposed to save some yourself, too. Over the years the government has also allowed folks investment vehicles like IRAs and 401Ks to protect part of their income from taxes while it's building for retirement. You can invest that money in all sorts of ways and build wealth as fast as you'd like. Or as fast as Wall Street will let you.

Oops! Wall Street. These kinds of investments also have RISK. You might lose wealth, too. Generally, though, these investments do make more than Social Security will. As an investment, Social Security is an under performer. A dog.

So why does Social Security earn so little? Because it's actually more like a bond. It's guaranteed. This is what Bush wants to change. He wants people to invest in stocks with their Social Security funds. Sure, you might get a lot more, that's even probable, but there's no guarantee. It's a gamble. You might just end up with nothing.

So which is Bush's plan? A hazard or an opportunity? Who should you believe in all this? NO ONE! The REAL problem with all this is that it's all vapor.

All long range economic projections are just that: projections. GUESSES! They are educated guesses, but they are still pretty much meaningless because things always change. Remember in the 2000 election, how both candidates acted like the Clinton surplus would be still paying down the debt right now? Whatever happened to that?

We really don't know what conditions will be like in four or five years, let alone in four or five decades. There could be a tiny move of 1% per year in extra inflation for a ten year period that would blow Bush's numbers completely off the 2048 mark. Or there could be a massive natural disaster. Or we could run out of oil and have to shift the economy to some energy that's more expensive. Or cheaper! Or we could just have a guy in power who overspends $500 Billion a year for six or seven years because he cut taxes too much and foreign interests could buy up all our paper and cause a new depression.

So if his talk of Social Security is all smoke and no fire, what's Bush really doing? I'd say he's trying to let his Wall Street buddies in on the biggest investment windfall since the Roaring Twenties. The go-go days of the Internet boom would pale in comparison. Do some reading and see if the financial powers that be haven't been salivating over the pool of money in Social Security ever since it was put in place in 1935. Anyway why should we ever believe someone like Bush on a financial matter? His oil companies all went bankrupt, and he's working hard on doing the same for the whole country.

Bottom line, there's a reason why Social Security was set up this way. It may not be very much money but as a guaranteed income, it will always be there no matter what. No, you shouldn't depend on just that in your old age; you should have some other investments, too. You already have private, tax sheltered accounts available for that. What's to fix?

Using both of these strategies together actually follows what the big gamblers on Wall Street do every day. It's called hedging your bets. You bet both ways. If you win big on the riskier stuff, fine! But if you don't, at least you have a little something to fall back on.

© 2005 - Rusty Pipes (MBA California State University, Dominguez Hills 2000)