The short answer is yes. The long answer is that Social Security is social engineering: It is not a handout. It is the single most effective measure in the world for control of population growth. It distributes financial risk for individual families.

If Social Security is Socialism, so is insurance. Both are collectivist, averaging financial risk, both make a promise of differed benefits in trust, both require stewardship to work.

Some criticisms of Social Security are that it is not elective, and literally requires an act of Congress to change. It places an undue burden on business. Processing the baby boomers through it will bankrupt the country.

What the critics of Social Security fail either to realize or are deliberately ignoring is that the real cost of Social Security cannot be made to disappear. It can only be shifted elsewhere. The cost of supporting the elderly will either be borne by taxation or, in its stead, by each and every individual family.

Social Security distributes risk. It is as if the entire country belonged to an insurance pool. If you miscalculated the rate of inflation post retirement, get sued out of your shorts, or have a devastating illness and your retirement savings are tapped out, what will you do? Try and do better next time? The nearly imponderable fact is that in life, there comes a point where there is not a second chance to get it right.

If Social Security were collected entirely from either one or the other of employees or employers, or not collected at all, it would not make a material difference in the bottom line of total compensation. The cost of caring for the elderly cannot be made to disappear. If the employer does not contribute indirectly to the upkeep of an employee's aging and the aging of his parents through Social Security, the employer will contribute directly through increased wage demands. An employer would also increase his risk of spot wage pressures by decreasing his risk pool to only his employees. Social Security distributes spot wage fluctuations to the entire country. How sensible is it to absorb more risk volatility through not participating in the largest and best run risk management pool in the world?

The strain of the baby boomers on the system was foreseen. The Social Security system has always had a trust fund, but in 1983, Allan Greenspan proposed that Social Security taxes be raised to fund the anticipated shortfall of the system when processing through the baby boomers. His plan was adopted. The additional funds were put in the Social Security Trust Fund.

The funds in this trust fund are in the form of special Social Security non-negotiable government bonds. Now since the beginning of the system, critics of it, chiefly Republicans, have decried the fact that there is “nothing in the fund but a bunch of IOUs”. President Bush has been the most recent complainer. And I bet you are wondering, if I paid the government cash out of my paycheck, where did the cash go? It purchased U.S. Government bonds, just like many retirement planners suggest that you do if you want a low risk low yield return during your retirement. Government spent the cash from your paycheck on current operations. So the Social Security Trust Fund is a giant off the books debt obligation that needs a solvent government to pay it back.

When public officials talk about the Social Security Trust Fund running out in the middle of the century they are talking about having redeemed all those bonds by then. You have to assume that, under current economic conditions and with current tax revenue structure, they are predicting that the income of the U.S. Government will be sufficient to service that debt. In effect, some are predicting a calamity while at the same time acknowledging that current funding is sufficient.

I suppose that the Social Security crisis might be more clear to people if you were just issued a bond of a certain denomination with a maturity date of when you get to be 62. Imagine how upset you would be if the President told you when you reached 62 that your bond was a worthless IOU. Imagine the reaction of all those people, foreign and domestic that have purchased U.S. Government bonds only to have them be declared worthless by Congress. But because they are all collected together in a “fund” politicians get to play games with you about them.

Another clever spin that is been floated is that the Social Security bonds are not like stocks or corporate bonds because they are not backed by assets, and hence worthless. Neither are stocks or corporate bonds for the most part. When a company is liquidated, meaning its assets are sold off to settle indebtedness, the normal net is about 10% of the book value of the company. A company’s main asset is its income stream, and a stock is priced and a bond is issued based mainly on that. Besides, the U.S. Government does have assets that can be liquidated. I bet I could get a lot of money for a B-1 bomber. I bet Yosemite National Park would fetch a lot of dough.

Since the FICA taxes collected started outstripping the current payments in the eighties, politicians have been “raiding” the Trust Fund. Only it has not really been raiding because all the proceeds of bonds issued to the Trust Fund go into the General Fund. Lots of accounting gimmicks have made things appear and disappear over the years. Throughout all that, no one has ever seriously proposed that the bonds in the Trust Fund be dishonored. Government operated under the assumption that there would be money to cover them, just like we cover regular bonds. You don’t issue debt unless you intend to pay. At the end of the Clinton administration, it was projected that if the budget remained balanced, servicing boomer Social Security obligations would not require raising taxes. Now Bush and the Congress are saying that we will have to raise taxes to cover it.

What happened? In effect, the Bush Administration has taken the contributions of working class people intended to secure their future and given the money to the wealthy. Neat trick. How did they do it? By cutting taxes and running up a national debt. Now they get to argue that in order to pay their obligation to Social Security, they will have to raise taxes.

My view of this is that the wealthy need to stop whining about a system that has worked nicely for a long time and give the money back to the people who put it in there, namely the boomers themselves.

Maybe we should have put Social Security into Chinese government bonds. At least then the U.S. government might be on our side in trying to collect on them.

Continued...Who wants to get rid of Social Security?

Do not renew, or make permanent, the Bush tax cuts.

Under no circumstances allow adding expense to the system with “private accounts”. There are no plausible scenarios in which private investment accounts will outperform Social Security in cost benefit ratio.