Tuesday, April 26, 2005

Musings 31--Lame Duck, Insurance and Buffalo

Mr. President is wrapping up the last week of his hard-selling of private accounts to the American citizens. By a large margin, 70-30 percent, he seems to be losing this fight. It is interesting because he hasn't lost many.

This may be the beginning of the end of Mr. President's second term. If he can't get a win on Social Security reform, he might just help usher in a three year legacy of a lame-duck presidency. Usually, this happens within the last couple of years of a two-termer. In Mr. President's case, it could be due to his picking of social security as a do or die issue.

The thing that most people forget about Social Security is that there is no such system. The real name of it is Federal Insurance Contributions Act Tax (FICA Tax). When you look on your pay stub that is what you see. Social Security is no place to be seen.

The term Social Security is a derogatory term hooked on the FICA Tax by the detractors--most of which were Republicans--because they felt that Franklin Delano Roosevelt's 1935 program was nothing more than creeping socialism. They figured that calling it Social Security every chance they got would make folks think twice about such a terrible socialist concept. Well, over the years the term has lost its derogatory meaning and now everyone--friends and foes alike--refers to FICA Tax as Social Security.

It doesn't matter, you may say, the system doesn't work. Workers could make more money doing other things with their 8%. That is probably true, but that is not what FICA was designed to do. The system is an insurance. It was designed to be a safety net for the folks who did not make lots of money. FICA Tax was never intended to be the only retirement system folks had--nor should it be today. If people would toss another 8 or 10 percent into an IRA, then the money they would receive from Social Security would act as a stipend to their investments.

When the FICA Taxes were first taken out of people's salaries, big business took a powder and handed retirement over to the government. Many corporations had pension plans for their workers, but these plans were not guaranteed and many folks lost their retirement due to mismanagement and fraud. Plus, the stock market only makes you money if you invest in things that show a profit. Tech stocks were hot in the 1990's and worthless after 2001. Lots of folks lost their pensions in plans that looked really good ten years earlier.

Social Security--remember it is an insurance and and insurance guards against loss--just kept rolling along. It didn't gain much, but it gave a cost of living raise and was solid. Without this safety net large numbers of folks would be destitute.

Mr. President wants to do away with the safety net. Down deep he probably still has core Republican beliefs that FICA Tax is creeping socialism. Of course it could too, that he just wants the boys on Wall Street to play with our money. Both of these are scary scenarios.

Changing the subject:

A buffalo herd stopped traffic on a Maryland highway. See link. Ok, maybe it was a small herd--about 10 bison. I dare say it has been several hundred years since that has happened. Most of the eastern bison were gone by 1805. I take it as an omen. When the buffs return it is the sign that something big is about to happen. I'm going home and clean my .45-120 buffalo rifle. That's within 1000 miles of Greasy Ridge.


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