SAVING SOCIAL SECURITY
We all know social security is going bankrupt. Its revenue sources are primarily deductions from paychecks known as the FICA tax. But our work force is shrinking, we are retiring earlier, and we are living longer. So less is going in and more is coming out. I think the failure to adequately fund social security qualifies as a catastrophe. Fortunately, rethinking the sources of funding make this an easy problem to solve, but a hard problem to solve politically. Simply assess a ten per cent use tax on users of America’s strategic assets. The next blog defines Strategic Assets as many things operated or regulated by the federal government. It would be like a sales tax for using government-sponsored services. For example, a fee could be assessed for crossing the border to finance the border patrol, with ten percent of the fee allocated to the Social Security Trust Fund. The electric bills for using the grid could be assessed an additional ten percent to be paid to social security. Ten per cent of airline tickets for using our airport network and ten percent assessed to docking fees at our port facilities could be collected for social security. Ten per cent for using the National Parks. Ten per cent of the Interstate Highway system toll roads. Ten per cent of our water bills. (Because water is a strategic asset).
But there is more to saving social security than just collecting revenues. During the Viet Nam war, the social security trust fund was absorbed into the general budget and the government piously assured us that general revenues would be used to meet the Social Security obligations. There are many assurances that before and after the unified budget accounting implemented in the Viet Nam era, the social security trust fund is administered the same way. So it was bankrupt back then, too? In any event, split it off and run it separately, like a business.
Instead of spending the social security trust fund surplus, the extra money should be INVESTED in strategic assets which could generate fees and revenues. Like a business, social security should seek at least a 12% rate of return, plus recovery of its investments in what is known as a payback period of about six years. The social security investments could be like a national hardened electrical grid which could be leased out. Social security would use its funds to build the grid. Then it would be leased out to utilities, with ninety per cent to finance the grid and ten percent to social security. Limit the use of social security to public sector projects, without the connivance of private sector businesses which have long sought to obtain funding for private sector enterprises through public funding, (football stadiums, for example). Another prime need is for coastal transportable desalination plants. As sea level rises, social security would pull up stakes and move to higher ground. Social security would be rewarded with a fair market return for its investments, like 12 per cent, and collect its use tax just like everyone else.
Another investment idea for social security is to invest in laboratories to manufacture generic drugs like insulin. The drugs would be priced for the costs of operation, a 12 per cent return, and then be taxed with the use tax rate of ten per cent. I would suggest starting with insulin and then add some generic drugs not supported by Big Pharma. They would be readily available and covered by Medicare.
Once social security is fully funded and solvent, then the first relief would be to cut the FICA tax on wages to ten per cent, five percent from employees and five per cent from employers.