Mr. Bob O’Brien: Hi, welcome to myWealth.com. I’m Bob O’Brien. I’m one of the senior instructors with the courses. Welcome to the blog for the day, “Why is it time to privatize Social Security?”

And this has always been a very controversial topic, privatize Social Security, leave it as it is and so forth, and one thing no one can argue about is the Social Security System is in very bad shape and it is in grave danger and these problems that it has have been magnified by the current economic crisis.

Now, if you’re a Social Security recipient, I don’t want you to worry or lose any sleep over it. You know, you’re going to continue to get your payments, but there are projected deficits in the future, and these deficits are getting worse and worse.

So it’s really important that you understand this topic and if you’re in the younger generation, make sure you take our investing course, make sure you take our course, so you’ll know what to do in terms of managing your own money, but also to have an opinion on this subject as well.

Voiceover: Be sure to check out the written blog at www.mywealth.com/blog.

Okay, the current economic crisis has further punished the Social Security System. The Social Security System was not in very good shape prior to 2008, but the economic crisis has made it even worse, simply because the Social Security System is funded through payroll tax, but unemployment as is well know has been on the rise and payrolls are being cut, and therefore, there is less revenue generated via the payroll tax.

Now, Social Security has projected deficits in 10 years, but these deficits have been moved up because of the current economic crisis and the reduced payroll tax money that’s coming in due to lesser payrolls.

So let’s take a look at what the current system currently looks like. Can you pay a payroll tax in order to provide retirement benefits to current retirees with the promise that you will receive your benefits when you’re retired? The government then invests any surpluses into Treasuries, which is used to finance other government spending and so forth, in which the Fed then prints money to buy these Treasuries.

So you can see this is a very fragile system and I posed the question, “Which is more irresponsible, continuing to just print money in order to finance Social Security or taking any surpluses or perhaps in the case of printing money creating any surpluses and investing them in the stock market?”

Now, the government has already become one of the world’s largest hedge funds and has taken major positions in the banks, in the automotive industry, and another problem that is on the horizon for Social Security System in inflation. The current increases that recipients receive each year is based upon inflation, and with inflation being projected to go to the roof, this is just going to increase to the overall expenditures of the system.

So make sure that you have your own financial house in order and that’s what we’re here to do, so don’t wait, get one of our courses, get educated, get to www.mywealth.com.

Mr. Bob O’Brien: One other thing that the government could do is to increase the payroll tax. But, on April 15th, there was a big tax protest, tax tea parties and so forth, and this is something that would be very difficult because the people that you would be increasing those payroll taxes for are the people that are not projected… basically receive anything from the Social Security System. So I think in light of that and in line of what we see in terms of some of the tax tea parties and so forth, the taxes tea parties on April 15th, that would be magnified, that type of protest, so it would be very difficult to increase those taxes on that, an people generally don’t want to pay taxes anyway.

So I’m not certain if I’m in favor of a complete privatization, but I do feel strongly that some of this money, assuming that there is investible money without interfering with government bonds and so it should be invested in stocks and it is just pruded to have a portion of any portfolio should have a portion invested in stocks. As long as that is disciplined and it is re-balanced appropriately, the risks certainly in the case of Social Security, a 25 to 50 percent portion in stocks, re-balanced appropriately, even for the last 20 or 30 years in light of the current crisis, it would be much better off than the system currently is if it was done properly with proper risk management and so forth.

So one thing to keep in mind, don’t trust your company pension. If you work for the state, you’ll be given the state pension and so forth and of course, Social Security, make sure that you have a plan, some type of plan, where you’re protecting yourself and that you have your own retirement plan.

Take advantage of anything that’s given you by your company, by your state, by Social Security and so forth, but nevertheless, don’t rely on those systems completely. You need to make certain that you’re saving and investing on your own, and that’s where we are here for, to help you deal with it. The personal finance course will help you design your retirement plan.

The investing course will help you manage the money and the currency course as well where you’ll have a better and broader understanding of the global economy. So make sure you check out these courses. They are incredibly affordable, $25 with the investing course. The currency course is $19.99. I’m Bob O’Brien. I’m one of the senior instructors. I look forward to seeing you in the course and have a great day.

Caller: “My wife actually hails from Oklahoma, so it’s interesting to hear that you lived with her. And we live in Central Valley, you know. But I’m curious, I’ve been [...] for 25 years so I will take issue with most of what you say. But I wonder when you say that it’s essentially theft to take from one through taxation to give to another at an individual level, how do you feel about, as another caller asked, about the proper role of government when they tax or essentially steal from everyone to provide for the common good? What do you consider is the proper role of government? And taking your argument the extreme part of Social Security and what not, don’t we essentially have to be willing to let people die in the streets if they do not handle their finances properly, for example, if they opted out of Social Security or what not?”

Robert Higgs: “We need to remember that all the money that goes into Social Security comes from us. And if it comes from us and it were never taken by the government then that would be in our possession for the relief of the destitute. And furthermore, it wouldn’t have been diminished by passing through the bureaucracy to support the Social Security Administration. It’s a leaky bucket whenever we transfer income through government because the transfer personnel themselves eat up resources along the way. In addition, the government doles out the money according to bureaucratic rules (one size fits all type rules), which means that the assistance can never be tailored so that it goes to those who truly are the most deserving and does not go to those who are basically gaming the system at our expense.

So, there is a lot to be said for never taking the money away from people in the first place. And when I say that, I certainly mean to suggest that no, I don’t think people would be dying in the streets if we never had Social Security. Before we had Social Security people were not dying in the streets for want of assistance. It’s true that the society was much poorer but that wasn’t because it lacked Social Security, it was because… if we go back far enough in history we will find that the economy was not as productive as it is now.

So, poverty was almost a necessity given the lack of productivity historically. But there was no lack of people’s assistance in help. I mentioned earlier all the fraternal organizations, thousands and thousands of them existed in this country and other countries before government took over the social insurance systems. There were countless churches, countless neighbors, countless friends, countless relatives. These were sources of assistance to people in need. Furthermore, they were people who knew the persons they were assisting. They could tailor the assistance so that they gave what was most needed when it was most needed. And they gave moral support. What you get now is you deal with a bureaucrat in a welfare office. This is one of the most demeaning experiences anyone can have. You’re forced to go in and beg for your livelihood from somebody whose just holding on to his job watching a clock to go home at 5 o’clock.

It’s far superior to have a system in which the destitute are aided by those who are close to them rather than relying on losing money by filtering it through government middlemen and then relying on one-size-fits-all rules, exploitable rules, corruptible rules, rules subject to the vagaries of politics. Rather than relying on that very imperfect means, people have the capacity to develop through charitable organizations, and to some extent they have anyhow, measures to relive distress and to help people in ways that are really effective and useful, and most of all give people help in a way that if they can be removed from that situation they are removed and not simply made dependent to stay forever on the government dole because it creates a kind of electorate for politicians that support that system.”

Raymond Clum: “Hello, my name is Raymond Clum and I approve this message. I’ll spend some time since we’ve been talking about Social Security reform. It’s a pretty dry topic. I hope this will be informative. I hope it will make you think.

Right now the Social Security system has been forecast to start running a deficit in the year 2017. Right now it’s now April 9th, 2009, so we’re talking eight years at which point of time Social Security will start spending more money than it takes in in payroll taxes.

Now, in the 2008 election cycle in the Democratic primaries, Senators John Edwards and Barack Obama both supported eliminating the cap or lifting the cap on payroll taxes, which right now running at about 6.5% of the first $97,500. Beyond that it’s not increased. Now, sulking the rich may be a popular thing to do, but when you raise the cap it just doesn’t hit the super rich. It’s going to hit doctors, it’s going to hit managers in manufacturing companies. It’s going to hit high overtime union workers, it’s going to hit engineers, it’s going to hit attorneys. Well, that wouldn’t be a bad thing.

Anyway, I digress. 16% of the workforce involves sales and office occupations. Some of these are going to be teachers, smart businesses are going to be hammered. It’s estimated that $136 billion in economic growth will be lost if the cap is raised or eliminated over the next 10 years. And as many as 1.1 million jobs gone. Now, for all of the pain that that’s going to cause, it’s only going to extend the life of Social Security from 2017 to 2025, another 8 years.

In addition, if you were to die right now, Social Security will pay your beneficiaries a onetime lump sum of $255. That’s it, no more. Now, your dependent minor children may get a survivor benefit, but my plan for Social Security would not affect that, nor would it affect disability payments. It’s only looking at the retirement benefits of Social Security. My proposal would be to develop, for lack of a better term, a 401S program. The S meaning Social Security, similar to a 401K. People of age 30 or under would automatically be enrolled. People of ages 30 to 40 will have optional enrollment. 41 and above would not be eligible.

As part of enrollment in this program you have several options, in movement of your payroll taxes to your 401S account that you would then be able to manage in ways very similar to your 401K, where you are probably limiting your investment options to very safe funds, funds that would have slightly more risks than the Social Security purchases of treasury bills, but will give you a higher return.

If you were to opt in for a 5% reduction in your Social Security benefit, 2% of your payroll taxes would go into this fund. The money would be yours, 100% invested. All the profits from that would be tax free. In addition, similar to a 401K, if you were to die, that money in that fund would go to your beneficiaries, and I’d be willing to bet it’s going to be more than 255 bucks.

But anyway, you take a 5% reduction in your benefit, 2% get kicked in. You take a 10% in your benefit, 5% will get kicked in. 20% for 10%. 50% reduction in your benefits, 25% goes in. If you want to totally opt out of the Social Security retirement program, 50% of your payroll tax will go into your 401S account. That does not mean that the money being withheld from your paycheck is going to change. We would still be pulling out the 6.5% of up to $97,500. What that will permit is a time period where there would be a side deficit where increased benefits would still have to be paid to those that are 41 and up. But we will have the ability then to start paying back that debt, and further pay down additional debt with the additional funds that the lowered Social Security benefit would receive.

The other option which is not nearly as friendly is to extend the retirement age, again. I’m 37 years old, I cannot retire until age 70. My plan for the 401S will be very similar to the 401K. If you too chose to retire, you can access those funds at age 59 and a half without penalty. Not only that, but you will be able to borrow against those funds for the purchase of a home, for emergency medical bills. It would in every way, shape and form act like the 401K.

Now granted, I’m proposing this in 2009, not the greatest year for the stock market. But if you look at every ten year period of the stock market, it’s had a positive growth. Every 10 year period. And if I am not mistaken, I have checked online to get the exact number, but I recall on Dave Ramsey talking about a 5 year period… somewhere in the range of 90% of all 5 year periods have had a positive growth that outpaced inflation, outpaced yields on savings accounts, outpaced yields on treasury bills.

The stock market is a safe investment if you look at 30 years down the road. That’s the main reason this part of my plan I am not looking to involve those of age 41 and older. They’re looking at a closer retirement and I would not want market volatility to affect their ability to retire. That’s why ages 31 to 40 get a little bit longer to retirement. I would give them the option. Personally, I would really strongly for myself take a look at the 20% reduction in benefits for the 10% going in to the market.

But that’s just me. I know what I am comfortable with as a 37 year old. Granted, if I’m elected in 2012 I will not be eligible for my own program because I will be 41 at that time.

It’s a way for younger workers to not only plan for their own retirement better, to build up savings even outside of their company 401K or pension plan or the minimal benefit of a Social Security program, but it provides real tangible assets for survivors as well. It’s not a panacea, it’s not going to be without pain. But it is a start, it’s a discussion point, it’s a beginning. We have to do something or Social Security is going to bankrupt our country. May God bless you and may God bless the United States of America.”

According to a newly released Sun Life Financial research report, it appears that about half of working people would opt out of paying Social Security taxes even if this means they will receive no Social Security benefits. Not only workers in their 30s and 40s said they would prefer to stop paying into Social Security, but even workers that are only a couple of years away from obtaining Social Security benefits.

Philip Moeller states that though overall pessimism in times of financial crisis is understandable, Americans’ attitude towards the Social Security system is surprising. As Social Security was always reliable and as the benefits it offers are indexed according to the inflation, this is a convenient lifetime rent. If you would consider buying a corresponding product from a private insurer, you would have to pay a very large amount of money up-front.

Moeller argues that, though Social Security faces serious financial difficulties, there are no reasons to attack it. Social Security needs only some minor adjustments to be a balanced and secure program. These minor adjustments involve to the retirement age, which should be increased a few years, the raising of taxes forced on Social Security participants, and some readjustments on Social Security’s inflation policy.

Moeller considers these changes to be a sure way to give satisfactory benefits to contributors. Restoring America’s confidence in Social Security by offering a stable program for the next 75 years is a priority. Both retirees and the general public should be educated about financial responsibility and the importance of Social Security for the success of a retirement scheme.

The primary focus of the Social Security Haters is on the need to cut Social Security and Medicare as they consider that both programs produce injustice for future generations. The cost of these two programs is to be paid by future generations, they say, and thus it brings about a tremendous generation inequity. But it is evident that these concerns are more likely based on the enormous cost of maintaining an almost bankrupt health care system rather than on retirement programs.

The United States should urgently focus on fixing its health care system. If health care programs were meeting requirements, even the most horrifying nightmares of the Social Security Haters would dissolve into thin air. Sadly, it is clear that the real agenda of the Social Security Haters is not fixing the health care system, as that would imply confronting other interest groups such as the pharmaceutical industry, the insurance lobby and the doctors’ lobby. The real agenda of the Social Security Haters is to cut Social Security and Medicare.

Though there are many aspects to discuss about the Social Security Haters’ goals, a single example is enough to understand their true intentions. As the housing bubble recently collapsed we could see that one of the results was a dramatic stock market plunge. This financial disaster brought with it a $15 trillion loss of wealth for retirees and old workers. Now everyone can see this as an obvious transfer of wealth from seniors to younger people. The young generation is going to buy houses and corporate capital at a very low price. A few years ago they would have expected to pay far higher prices for the same stocks and houses.

But the Social Security Haters don’t seem to notice this and many other aspects of the social reality. They just continue their war against Social Security and Medicare. As they ignore the wealth transfer to the young, and fail to notice other issues as well, we should be aware that the Social Security Haters’ real concern is not the so called generational inequity but cutting Medicare and Social Security.

The reference to Social Security was brought up near the end of the speech that Obama made. He said that there was a need to cut the spending to reduce the deficit. He also noted that in order to preserve the nation’s long-term fiscal health, the growing expenses related to Medicare and Social Security need to be addressed. He stated that comprehensive health care reform would be the best method to strengthen Medicare. He also said that there was a need for a discussion regarding strengthening Social Security as tax-free universal savings accounts are created for Americans.

His comment was actually quite similar to what ex-President George W. Bush said back in 2005. He had suggested the creation of private savings accounts. Many Democrats, along with some Republicans instantly rejected the idea, which gave Bush a major policy loss. Because of this, lawmakers are starting to wonder whether Obama was about to propose the same idea that Bush did.

Other than this particular comment, though, most of the ideas Obama announced were well-received by his party. The opposition on the other hand, reacted to his ideas with some tepid applause. Later on, some lawmakers said that the reason why the Social Security remark did not receive much applause was that the people could have been too tired of having get up for an ovation to applaud the president that they might have let that one pass.

Some other reactions from lawmakers were denial. Some said that private savings accounts really had nothing to do with the issue of Social Security. Moira Mack, the White House spokeswoman, said that Obama was looking forward to working with the Congress so that all the details could be ironed out.

During his campaign, Obama condemned what he referred to as the “privatization” of Social Security. However, the Democrats who criticized Bush back in 2005 called everything that he proposed “privatization” although he stressed the voluntary nature of the use of private savings accounts in supplementing or replacing retirement income.

Their point was if people can opt out of this system, the whole idea of having a security net would ultimately collapse. In effect, it had to be universal forced savings.

D-1st District Representative Robert Andrews, the House Labor and Education’s pensions subcommittee chair, said that Obama would not do anything in order to tamper with benefits. Andrews stated that he was drafting a legislation so that low-income workers would have an easier time maintaining their savings accounts that they could use for their retirement.

However, D-10th District Representative Donald Payne said that he was not so sure that this is what the President meant. He said that that Obama keeps on offering things to Republicans in the hopes of getting bipartisan support.

The most interesting remark about the subject, however, was made by Gene Sparling, who was a Treasury policy analyst. He said that the private accounts are not going to be a part of Social Security reform itself but later added that it does not mean, though, that they could not be part of a package.

Proponents of a privatized system have argued for years that private accounts would be totally safe because they would be limited to blue chip stocks exclusively. The type of companies investors would call a sure bet for long term investments. Companies like Bear Sterns and Lehman Brothers. What could possibly go wrong if we invested our Social Security accounts in those types of companies?

Apparently everything could go wrong. Both Bear Sterns and Lehman Brothers, two of the largest financial companies on the planet, had a complete collapse. Can you imagine if people’s Social Security benefits were tied into those companies?

Think about the pressure this would put on the government to keep these types of companies afloat. The amount of expense to the taxpayer that would have to go into it would be tremendous. Not a pretty picture is it?

Unfortunately, the current situation is not much better either because the Social Security Trust Fund is already guaranteed by the government and ultimately the taxpayer. The way the system was set up, it has become a burden to just about everyone.

Therefore, Social Security should not be privatized, it should be abolished – in a safe and slow manner. Seniors should still get what they paid for and what they were promised, but we must stop being cruel to young workers who are forced against their will to pay into an antiquated system they might not agree with and that might not ever benefit them at all.

Abolish Social Security, pay outstanding benefits by raising taxes or printing money, and allow everyone else to invest their money as they see fit. If some people (rightly) believe stocks are too risky, they can buy government bonds instead, or real assets that preserve their value over the long term, like gold.

Dr. Peter Holmes: Good morning and welcome, and I am Dr. Peter Holmes, orthopedic surgeon, host of your program ‘Ask the Doctor’.

My guest this morning is Stephan Kiese. Dr. Kiese is a cardiovascular and a vascular, and takes care of your blood vessels. If you have any questions for Stephan or any of my other guests in the future, you have two ways to reach me. Do it through my foundation, that’s kneedfoundation.org or fax 210-696-6012.

Let’s talk about how your Social Security and Medicare benefits are decreasing and will continue to do so. Recently, a lot of you heard on the news about the Big 3 and how they are going to have a problem with their retirement benefits.

Well, here’s a letter from the Social Security Administration to a friend of mine which he gets maybe once every quarter or half a year. It says,

“Social Security is a contract between generations for decades. America has kept the promise of security for its workers and their families. Now, however, the Social Security system is facing serious financial problems, and action is needed. In 2017 we will begin paying more benefits than we collect in taxes. Without changes, the Social Security trust fund will be exhausted and there will be enough money to pay only about 78 cents on the dollar.”

This is from the government, this is the letter no. 1 that they got today.

Now folks, the difference between the Big 3 and you is that the Big 3 promised benefits, but you pay for benefits. Okay? Many of you pay into Social Security because you have no choice, and Medicare because you have no choice.

So what is going down here? Well, let’s explain. First of all, not everybody does pay into Social Security and Medicare, only two-thirds of us suckers pay into this system. One third of the people have managed to opt out. Mainly, teachers, large unions, federal employees and the like. And you drag them kicking and screaming back into the Social Security system.

But, the two thirds of us that are paying into the Social Security system have been paying in excess for years, and where did the money go? It goes into the general budget to pay for the general budget items for everybody. That is 100% of the general budget, including the one third of the people that pay no Social Security and no Medicare.

So, in my opinion, this is already happening with Medicare. Medicare was founded in the early 1960s. In the year 2004 it hit the same thing that is going to happen in 2017 for Social Security. And in my opinion, Medicare is now paying 78% of what they should be paying. You may not think so, but as doctors we know so.

Number 1: Many physicians are no longer taking Medicare, so you are getting decreased benefits.

Number 2: Many of you cannot get procedures on Medicare that you could get if you weren’t on Medicare. You can’t get in an outpatient center because they won’t pay for it. You have to go to hospitals. New rules. You’re getting decreased benefits. There’s certain things you can’t get, certain implants you cannot get. You are getting a decreased amount of Medicare, and it’s going to continue as the baby boomers get more and more and you get less and less benefits.

Why? Because not one dime of the Medicare excess was saved for 40 years. It was spent in the general budget. There is nothing. Not a zippo. You think Madoff had a scam? Think about what’s happened to this.

Bottom line is this. We still have an excess in Social Security. You need to insist that that gets privatized. Oh, bad word. But to me that means even putting it in cash, gold, anything. Because at least it’s there. You’re putting 20% of your net salary in. Get it privatized. Put it aside. Do not balance the general budget for those who are not putting into it. Those who scream against privatizing…. most of them have opted out. If you don’t privatize its going to go away. 78% is going to go to 0% within six letters. That’s my prediction.

These are my opinions. If you have any comments you have two ways to reach me. Do it through my foundation at www.kneedfoundation.org or fax 210-696-9012 to ask the doctor.

Republican Senate Minority Leader Mitch McConnell while interacting with the media lashed out at Obama and his chief of staff Rahm Emanuel for back-tracking on their earlier commitment towards Social Security reforms. This purported back-tracking of Obama pointed towards a successful lobbying by Liberals who were apprehensive of Obama weakening Social Security.

Sen. Graham (R-S.C.) too did not fail to notice the pressure from the Left. He likewise advised the administration to take bold steps when it came to realistic age adjustments and benefit recalculation for high income Americans. Graham, who incidentally was also in Obama’s Social Security breakout session on Monday wished for the same kind of support for Social Security that Obama accorded to health care because it was one reform which he felt to be really achievable.

Sen. Sessions (R-Ala.), who lamented Obama for espousing health care and maintaining a studied silence on Social Security, joked that such a situation had probably arisen due to the fact that in the past, when President Bush had tried to do a similar thing, he too was stonewalled by the Democrats.

Though he found the speech to be brilliant, Sen. Ensign (R-Nev.) too wished for more talk being made about entitlement reforms.