The Bulletpoint Blog

$1.7 Trillion in unclaimed property

My home state, Washington, has a website dedicated to returning unclaimed property. People who have bank refunds or other small checks awaiting them for a variety of sources can go to the Department of Revenue to collect.
The federal government wants to assure that you never collect on your biggest receivable of all - $1.7 trillion worth.
If you're a worker, the Social Security Administration has $1.7 trillion in the bank awaiting your retirement. That figure that has grown about $155 billion in the last year alone.
Bush intends for the government to never have to repay their debt to you AND they want taxpayers to divert 30% of the Social Security income stream into the stock market. The way that they intend to coax people to divert these funds is based on a big lie; "You'll get more money from the stock market".
No, you won't. Here's why. There are big costs that have not been accounted for in reform discussions.
If SS were only a retirement fund, it would stand to reason that the 30% you diverted from Social Security would result in a slightly more than 30% cut in your SS benefits. However, there is one very big caveat;

• SS is not just retirement insurance. Almost 30% of the after-reform expenditures are unrelated to old-age benefits. Workers who diverted their taxes from SS still share the burden of funding disability and survivors insurance as well as bearing the entire burden of borrowing to pay current retirees. 22% of current SS expenditures are for non-retirement programs.
• In other words, for the system to remain solvent, retirees who (when they were young and easily misled) elected to divert their taxes would have their SS benefits cut almost 40% - perhaps more. The difference represents the extra cost of borrowing as well as the increased proportion of "overhead" - the fixed cost of the survivors and disability programs. The below charts illustrate the point.

Current Social Security

The above chart illustrates the relationship of the various forms of Social Security expenditures today. $0.78 of each dollar expended goes toward retirement benefits. $0.15 goes to disability insurance payments, $0.07 goes toward survivors payments and fractional penny goes toward other stuff, like administration.


Social security after reform

After reform in which 30% of the income stream is diverted, the total pie is still the same size ($531 b in todays dollars), but non-retirement expenditures make up a larger proportion of the remainder. In a post-reform SS system, non-retirement expenses are equivalent to over 50% of the amount provided to retirees.

posted by Lumberjack @ 5:28 PM