Every American worker already has a personal account. Every employer is required by law to submit a yearly report on who worked for them during the past year and how much they made. It’s on W-2 forms that go to the U.S. Treasury before the first of every year, with another copy going to the individual for income tax purposes. From the record of how much an individual made each year, the Social Security Administration can determine how much he or she paid in payroll taxes and thus the benefits due upon retirement. This is the raw data for the way your benefits are figured.

President Bush’s idea of “personal” or “ownership” accounts is basically an idea borrowed from the federal government’s own Thrift Savings Plan that his father helped establish in 1987. It’s much like a 401(k) savings and investment plan that could work for everybody, not just younger entry level workers at the bottom of their pay scale. What difference would it make if a person in his or her sixties belonged to the plan for less than a month, week, or even a day? If it’s good for some, it should be good for all.

Elsewhere on this website you will find solutions and recommendations for Social Security reform that, at first glance, seem to parallel this idea with important differences.

Basically, the solution is for the federal government to STOP STEALING THE MONEY workers have been contributing to Social Security since 1983 when payroll taxes were raised far beyond what was necessary and have been producing enormous surpluses ever since.

Once the government stops stealing our retirement money, there are but two logical choices of what to do with the surplus money. One would be to cut payroll taxes by at least fourteen percent bringing them down to breakeven or the amount of money that the Social Security Administration requires to meet its insurance obligations. Or two, put the excesses in a real trust fund instead of the phony so-called Social Security trust funds (Federal Old Age & Survivors Insurance trust and the Federal Disability Insurance trust that we normally think of as one single trust fund) that hold no viable assets and are nothing more than a scam to double tax the public plus interest.

Setting up a real trust fund addresses the same subject as Bush’s ownership accounts. However, there are crucial differences that must be considered:

1. The federal government has already proven that it cannot be trusted to manage such a fund and the public’s interest would be much more protected in the hands of private sector people who are not above the law and can be held responsible. This is where the word “privatization” is applicable and there are many ways to set it up.

2. As a not-for-profit government organization, the federal government should never have been in the insurance business in the first place and was warned against calling it “insurance” by the Supreme Court in 1937 after two years of debating the legitimacy of taxing workers for retirement funds. The Court wanted it sold as a welfare system, but the Roosevelt administration knew worker pride would never accept it so they sold it through as insurance (which is precisely what it is) and by continuing to do so have established the greatest implied contract in history.

3. The Thrift Savings Plan allows participants to choose between several options as to where their money is invested and to vacillate between these options almost at will. This may work fine for a governmental institution that spends time sitting on its hands looking for something to do, but it’s a disaster for the private sector that now submits payroll taxes in lump sums. The result would be an enormous amount of paperwork for private companies and cause inflationary product and service price increases to make up for the additional cost of handling this work increase. This point makes it essential that any private sector trustees have access to the W-2 form records mentioned above in order to determine profit dispersal.

4. Many people got a lesson in stock market investment when the crooked “bubble” of the Nineties finally burst. Solid investment policies are not for amateurs. However, there are several highly reputable organizations like TIA-Cref that consistently yield at least a seventeen percent return on investment by covering a broad range of the stock market plus other investments like real estate. Even Milton Friedman doesn’t tell his retirement insurers where to invest his money. How can we expect the average worker to do better? There are dozens of investment areas other than the stock market and Social Security could probably, for instance, hold every single family home mortgage in the country.

Please note that we are talking about a proper valid trust fund only for the surplus generated by payroll taxes, not the amount that goes to today’s retired and disabled. This is a crucial factor and one nobody mentions.

Social Security is an insurance program just like those offered by Prudential, John Hancock or other private insurers. All private insurance companies pay benefits from the premiums paid by new and existing members. The only difference is that they don’t call it pay-as-you-go or “paygo,” the nomenclature of bureaucrats in a not-for-profit organization. What’s left over is profit. They invest that profit. They do not run around spending it on foolish things.

The federal government is caught on the horns of a dilemma. They cannot talk about investing only the surplus/profits generated by Social Security without also confessing to the fact that they’ve been stealing this money for years.