Yesterday, we identified a very under-appreciated problem: the oncoming freight train/ponzi scheme, which goes by the name of Social Security (SS). Today, we'll offer Marko's Take on how to fix the problem.
The good news is that a very real solution can be cobbled together. Unfortunately, we must all realize, as a nation, that we've been screwed and that virtually everyone will be subject to some form of sacrifice. The bulk of money has been squandered and, rather than crying over spilled milk, let's suck it up, make the required adjustments and realize that the problem was decades in the making. The solution can be implemented immediately!
Because SS is like a drug and the population is addicted, we will need to employ a gradual process to minimize the adjustment pain and withdrawal symptions. Therefore, we must all become members of SS-Anonymous and declare "My name is Marko and I'm an SS-aholic"! Fortunately, this process won't take 12 steps! In fact, it ought to take 7.
Ready to solve this mess? Here we go!
1. For anyone receiving SS benefits, make only one change: apply a "means" test. In other words, let's admit that SS is nothing more than a disguised form of welfare. So, if Warren Buffett or T. Boone Pickens or anyone else who is wealthy is receiving SS, they must be cut off immediately!
2. For anyone older than 55, permit them to stay in the system and receive their promised benefits and pay into the system as it currently stands. However, we should still offer incentives if they surrender their upcoming benefits. (I'll get into the possible incentives in a minute).
3. For anyone younger than 30, immediately stop taking payroll deductions for SS and take them out of the system altogether. The payroll deduction should also apply to the "employer" portion. In so doing, the "cost" to an employer of adding a body will DECREASE by more than 15%! Guess what that means? MORE EMPLOYMENT for the young!!!
4. We should require that everyone entering the labor force "set aside" 5% of their income, on a pre-tax basis, into some form of deferred income vehicle like a 401-K or IRA, however without a maximum. If they choose to save 20%, great! The deployment of the funds should be mostly left up to them. However, I would urge that at least 2 1/2% be mandated to go into U.S. Treasuries. Someone has to buy our bonds!
5. Offer incentives for anyone wishing to "opt out" of the system. Obviously, the incentive structure will have to be sweeter the older someone is. It would not be fair to offer a 54 year old the same incentives as a 31 year old.
6. The incentives could include future income tax credits for a portion of lifetime "contributions". Therefore, an older person will be given more value than someone younger. Another incentive could be a tax credit applicable to "estate taxes" once someone passes away to benefit the payee's heirs. In fact, some fraction of the "asset value" could be passed on directly to heirs. The list of possible incentives is endless, so I won't go into an exhaustive list but as you can see, we can creatively "offset" the amount that Uncle Sam has STOLEN and find ways to partially restore the "value" of our collective thievery.
7. Make sure that Congress is immediately put into the system. Since they will have to pass the laws necessary to make the fixes, force THEM to realize what a wonderful system we have! That way, perhaps, they can become a bit more creative in ponying up legislation. Not that they need to be so creative. They simply need to read "Marko's Take" and see that a blueprint for fixing the mess has already been laid out for them!
If you have any other ideas on how to fix the mess or think I'm out of my mind, you know what to do... TAKE ME ON!
P.S. Because of the recent market volatility, we will update prospects for the stock market and Gold over the weekend.