Star Parker, Still at it; Still Wrong

 

The unfailingly reprehensible Star Parker has started again. Today's op-ed column in the local paper starts by blaming Social Security for being a “failed Socialist program.” She then speaks with some truth to the fact that the return on the trust fund investment is lower than current interest rates, which it is. What she doesn't say of course is that trust fund assets are invested in long-term government instruments and less liable to fluctuate either up or down depending on markets.

The other thing that Ms. Parker ignores completely is the fact that, as I have written several times before, the Social Security system, as incepted, did not forbid either increasing the withholding rate or modifying the age of eligibility. At the time Social Security was passed in 1936 the average American would not live long enough to receive it because the average lifespan was about 61 and a fraction years. Now the average American lifespan is 78. By 1955 it was already 69 and any Insurance company actuary could have predicted the current status.

      See the problem yet? OK try this also: from 1947 to 1962, the average American woman had statistically more than 3 children (peaking at 3.7 in 1955)

and that remained above that figure until 1963, when the number began declining. The average now is just a hair above 2. This means that for 15 years there were over half as many more US citizens born who would eventually draw Social Security (and draw it longer). Those 1950s “Boomers” are impacting Social Security and Medicare, while a Congress which, from 1950 to today, has done little to substantively deal with the situation, bitches about the deficit.     

Not only are we living longer, but because the baby boom has pumped so many new eligible recipients into this system through the 50s and into the very early 60s we now have more people entering the system than are working and paying into the system. This in itself was not so readily foreseeable; What was foreseeable was the increased lifespan. By 1950 it was obvious that Americans were living longer or remaining healthier longer and if the administrations of Dwight Eisenhower or John F. Kennedy had been willing to do it, the eligibility age should have been increased. A simple plan would have been to pass legislation requiring a 1-year increase in full eligibility every decade until whatever age was deemed appropriate was reached. Initially the full Social Security eligibility age of 65 was based on the assumed physical and mental status of the average recipient. Unfortunately (for the system) 70 is the new 60.

There are those who argue that increasing the retirement age is a negative because it “reduces the benefit for all recipients.” This who cite such a statistic omit the words “Full Benefits.”  Of course, they say this because they cling to several shaky propositions.  The first fallacy is that in those families working 2 minimum wage jobs and struggling to get by if they didn't have Social Security deducted from their pay they would save it in some other sort of financial investment program. A far more likely reality is that, with increased but still marginal income, the decision to not spend the extra money that removing Social Security would provide would more likely result in spending the money on gasoline, a car, clothing, food or any of the other immediate expenses that sometimes are left wanting because of insufficient income.  

        Assuming extra cash would go into savings (a reasonably safe but low interest option) belies the real statistics of the whole economic spectrum.  The numbers speak for themselves. A recent survey found that most Americans had $1,000 or less in personal savings in 2023; a third have $500 or less saved, while 8.5% have between $501 and $1,000. Even more startling, 11.4% said they have no savings. On a per family basis, this means that about one in eight Americans have no financial safety net whatsoever. This, of course, also implies that they are prime candidates for usurious lenders in times of financial stress. 

        As an example, consider a 40 hour per week minimum wage earner (and forget the “Yeah, but they’re all high school kids” argument, because 55% of minimum wage earners are over 25 and 11% are over 55):

Assuming a high end $15 hourly and a 40-hour week, that comes to $600 pre-tax weekly. Federal income tax takes at least $60 dollars of that and Socia Security another $37. Do we really think that if there were no SS deduction, that extra $37 would religiously be saved?

Of course, what those who, like Bush 43, scream “Socialism” when addressing Social Security and urge privatization never mention is the impact which such private accounts could experience in situations such as the housing bubble collapse of 2008 -2010. To begin with the supporters of privatization, many of whom are deep in the pockets of people in the private banking industry, would have you believe that all private investments are safe and would earn more return on investment for the investor. What is implied here but never stated is the requirement for an entirely new branch of government simply to supervise how Social Security monies on an individual basis were invested with an eye towards ensuring the safety of such investments.

Trusting the private banking industry is a huge leap of faith considering the history of such organizations. Let's consider just one such: In 2005, 2006, and 2007 the Bear Stearns Real Estate Trust was an available investment option in my wife's retirement plan with Florida Hospital. I know, you say “Bear Stearns? Why they're a leading investment bank on Wall Street, gotta be safe, right? As I looked at the historical earnings of the trust and saw a 28% per year yield, I actually considered whether we should invest her funds with Bear Stearns. We did not because, unlike the $15.00 an hour minimum wage earner, I actually know something about finance and about reasonable return on investment. The other consideration here, before I continue with Bear Stearns, is that if your investment is a 401K, a Roth IRA, a simple savings account or most other portfolio types, other than guaranteed annuities, what you have when you retire is all you’re going to have (in the assumed absence of Social Security). When you use it all, it’s gone.

        Now back to Bear Stearns real estate trust. In the interest of full disclosure, I am approximating this, because Bear Stearns failed and the fund performance history is no longer available. At its peak the fund was hovering well above the $90 per share range and was largely based on sub-prime mortgages, although we hadn’t actually heard that term yet. Bear Stearns as an entity peaked in the $172 range. Let’s assume one had invested steadily and had watched their retirement pot turn $40,000 in actual investments into $350,000, which is actually a conservative guesstimate based on the Trust’s astronomical growth, and then retired, planning to either sell off shares for income as needed or sell them all and find a nice safe 5% annual income account and use that for living expenses. The retiree could have, over only three days, watched share prices tumble to $5 and their $350,000 turn into roughly $17,000! This happened. Bear Stearns, greedier and more poorly managed than most, failed and was bought by Morgan for $2 per share. On the other hand, of course, in the real world this poor schlub would still have Social Security to keep the wolf from the door, because Social Security isn’t market (or commercial investment bank) dependent.

 Star Parker and her ilk shout “Socialism” like a curse word and ignore the fact that Social Security’s real problem is demographic, not philosophical, and that reasonable action by appropriate legislative measures could have insured its stability. They simply ignore our longer average lifespan and the Baby Boom population “bubble” because it doesn’t fit their narrative.  Secondarily, they also choose to ignore the simple fact that, as Jesus reportedly said, “The poor are always with us.” And they are and always will be. Ms. Parker, who proudly proclaims her “born again” status apparently edits her savior to suit her purpose.

There will always be those among us who, because of various factors, will work hard for low pay, pay income tax, and sales tax and have no savings to speak of. Currently half of the US population aged 65 or older live in households that receive at least 50 percent of their family income from Social Security benefits and about 25 percent of aged households rely on Social Security benefits for at least 90 percent of their family income. Star Parker, like too many Americans, suffers from the egocentric “If I can be financially successful why can’t everyone else?” point of view. She obviously failed Statistics and Sociology.