06 March 2007
Planning Assumptions
The cold is back, bitter and ironic, and the shutters rattle on the windows from the chill leaking in the windows at Big Pink. It is a broken promise of Spring, cold enough to snow, if there was enough moisture. This blast out of Canada is dry, though, and only shakes the bows heavy with green the color of money.
Green is also the color of the lines on the little brochure that came from the Social Security on Wednesday. The Administration asked for corrections on the long columns of total income that originate in the mists of time, or 1967, as the case may be.
It looks like I have paid the tax on somewhere around $1.6 million dollars over the years, though that is a meaningless number unless weighted in constant dollars. Some of the smaller totals in the distant past represented real dollars, and the more recent and inflated numbers are pure fiction.
The Administration estimates that I have paid $86,000 in social security taxes, and my various employers have kicked in another hundred grand.
I don't know why they bother to send these summaries out. It only serves to make me cranky, trying to establish planning assumptions for the future based on lies. I'm glad I'm too old to be on active duty any more. The Guard is being notified this morning that some of their units are going to be recalled for a second trip mostly-all-expense-paid trip to Iraq.
That has never happened to them before, and wasn't in the plan. As to the other sort of government fictions, the brochure I held from the Social Security Administration maintained the pleasant fantasy that the money it discussed is out there in a lock-box someplace, instead of being dispatched immediately to current beneficiaries or people being paid not to grow corn.
Later, after the news that appeared to be largely fiction-based, I was starting to nod off in front of the television. Christopher Buckley came on “Hardball” to flak his new book about the real solution to the looming problem. There are no coincidences in life, so I assume the book tour is somehow connected to the mailing from the Government.
It is timely, I cannot deny. That afternoon I had run the numbers on how to spend my 401K and provide a level funding profile across the retirement option years. It was not pretty, but it was not bad. Something to count on, I thought, and it gave me the option to tell the Boss to go do something improbable in the not too distant future.
I'm as delusional as you are. There is no way out of the train wreck that is coming. Buckley's book is called “Boomsday.” It is supposed to be the “fizziest” of the last dozen of his offerings. I like fizzy things, like Alka-seltzer. The story pivots on what happens with the Social Security system fails, and pits querulous boomers like me against my sons, who abruptly decide not to pay their taxes.
Much fizzy humor ensues, which revolves around tax incentives for people to blow themselves away upon hitting age 65. There would be “significant penalties” for those who stick around.
I would be tempted to blame the Greatest Generation for having conceived and executed such an astonishing Ponzi scheme, but that would be neither fair nor true.
It was the Boomers who chiseled the system. We, or rather our clever Washington surrogates, cheated ourselves and our kids with deliberation. Until 1984, social security was based on the proposition that the total amount of taxes paid into the system was roughly equal to the total amount paid out. The Boomer ripple was already an established fact of demographic life, and the system was headed for trouble in the science fiction land of 2011.
If things were to continue as then constituted, there were really only two options. Benefits could be slashed with the onset of the mass retirements, or taxes could be sharply increased to keep the system in equilibrium.
Compromise being king around here, a hybrid solution was adopted to make the system solvent for all time. The government began collecting additional taxes immediately, and the system began to run enormous surpluses, which were expected to continue through 2018.
Ronald Reagan was in charge then, but the boomers were advancing to grab control of the reigns of government. Our first true Boomer Chief Executive was Bill Clinton, and a pleasant rascal he is. His replacement made a stab at addressing the problem, but like the health care debacle of the first Clinton Administration, it was overcome by resistance from other boomer-run special interests.
It is worse than that, of course, since the surplus has been already spent on other worthy programs. Current receipts were exchanged for Treasury Bills, just like the ones the Chinese paper their walls with. That can't go on, as everyone knows. We are busted by 2030, when I would still be a couple years younger than my folks are now, even if the notes were going to be good.
That means that assumptions will have to change for what the system will provide. I wouldn't blame the kids if they told us to go screw ourselves.
Chris Buckley has a great time with the premise, and before I fell asleep I vividly seem to recall that he said his outrageous premise was intended to spark an honest dialogue about the problem.
I yawned. It has been tried before. It wasn't until I was pulling the covers up to escape the draft from the windows that I realized that someone is going to actually pay for this, and I shivered a little when I realized in the darkness who it will be.
Copyright 2007 Vic Socotra
www.vicsocotra.com