Save Social Security!

According to the 2009 Social Security and Medicare Trustees Reports, the current unfunded liability of Medicare and Social Security, or the difference between benefits promised to current and future retirees and what will be collected in taxes and Medicare premiums is around $107 trillion. This is an astounding number, nearly 10 times our annual GDP. It’s obvious that as we move to the future, general revenue tax dollars will be needed to help meet these obligations, to the tune of nearly 50% of income tax revenue by 2030. Medicare premiums and Social Security taxes will have to be greatly increase to compensate for this massive debt burden.
Or we could phase out Social Security all together. Instead of having a transfer payment system, which has shown to not work nor provide for an adequate retirement income, we should set up a privatized savings plan for people entering the permanent work force.
Currently, employees are forced to contribute 6.2% of their income towards Social Security, and employers are forced to match that, up to a certain amount. This money isn’t saved for the future, it is transferred immediately to current Social Security recipients.
Here’s an idea. Let’s suppose a person enters the work force at age 22, and works for 45 years. Let’s also assume he/she starts with a salary of $35,000 per year. I have no idea what a starting salary is right out of college, and of course it varies by profession, but I think $35,000 is a good ballpark figure. Because we are going to get rid of the employer contribution to the FICA tax, this can automatically be added to the starting salary. If we assume that total payroll taxes are 15% (split between employee and employer) we can add 7.5% to the starting salary of the employee immediately, raising it to $37,625. My idea is to mandate (I hate government mandates, but bear with me here) a private savings of 15%, essentially equaling what was once payroll taxes. If this money were to be put into a private savings account earning only 2% per year (compounded daily, what the heck), and if we assume the employee receives an average annual raise of 3%, then at retirement, between contributions and accrued interest, the employee will have accumulated $768,741.61 in retirement savings! If we bump the interest rate up even a half a percent, to 2.5% this savings jumps to $855,185.74! That’s just savings, that’s not even any 401(k) contributions.
I also propose that this money be deducted pre-tax. Of course, soon I will propose an alternative to the current tax system, rendering “pre-tax” and “after-tax” a moot subject.
People wanting to continue with their current system of sending the government money and hoping that at some point when they are old they’ll get something back are more than welcome to do so. However, I believe fazing in this “privatization” of retirement savings would be more beneficial at providing a retirement income for those new kids just entering the workforce.

All Aboard?

Now that Wisconsin has been awarded $823 million in so-called stimulus money to build a "rapid transit" system between Madison and Milwaukee, there are a number of issues to talk about and questions to ask.

I will admit I have not been to any hearings on this matter. I can only comment on things I've heard from others, or from what I've read, or what I believe according to my core principles.

My first question is "Why?". Why is a passenger train needed between Milwaukee and Madison? Is it so people who live in one city can commute and work in the other? It is folly to think that the train will take you exactly where you need to go. If you do work in Milwaukee and live in Madison, you will more than likely have to drive or take a bus to the train station. So, you're waiting at the bus stop, riding the bus to the station, waiting at the station, and then hopping on the train to Milwaukee. You get off the train somewhere in Milwaukee, and I'm guessing you'll need to take a bus or a taxi to your final destination. How much is that going to cost you? Less than gas and parking?

Or, let's say you live in Cross Plains and want to take the family to a Brewer game. Unfortunately, the train doesn't go to Cross Plains. You'll have to drive either to downtown Madison or the airport, pay for parking, hop on the train and head for Milwaukee. But, the train isn't slated to stop at Miller Park! Initial plans are to have a stop in downtown Milwaukee and at Mitchell International Airport. So, you'll have to get off the train downtown, and then take a cab to Miller Park. Don't forget to tell your cab driver to come back and pick you up after the game.

My second question is related to the first. Why now? The United States is over $12 trillion in debt, and instead of returning this stimulus money to the treasury to buy down some of the debt, we're going to burden our future generations even more by spending it on a project that will not be able to sustain itself financially. Conservative estimates have put the government subsidy at $46 per rider. This is over and above what a ticket will cost. Seeing that Wisconsin already has more debt per capita than California, we are only going to be adding to that debt once the train is up and running. The $823 million does not cover one penny of operating costs. I offer to you that we are in more of a financial crisis than at any time in our history, including the Great Depression. What are we going to do if China and other countries stop buying our Treasury Securities? What will happen when no one will loan us any more money? Where will the train money come from then?

I digress.

Third question: Who is going to ride the train? The invention of the internal combustion engine has made us a mobile society. We can go anywhere, anytime we want. We are not limited in our destinations by fixed routes on tracks laid down years ago. This argument pertains more to the impending light rail boondoggle coming to Madison than it does this "high-speed" rail line, but as a mobile society we can also determine where we want to live, despite the never-ending attempt by those who think they know what's best for us to force us into mixed use, high-density housing. I'd offer to you that as a mobile society, and as communities grow or wane depending on the economic circumstances, we can move bus lines, if people are inclined to take a bus. We cannot move train tracks. Unless of course you want another $500 million in stimulis tax dollars from the government.

I like my car. Scratch that, I don't have a car. I like my truck. I like getting in it and driving to where I want to go when I want to go there. I like being on my own schedule. The automobile has changed transportation for the better in that it gives us the convenience to do just that – go where we want when we want.

Next question: What is "high-speed" rail? How fast is the train going to go? I have heard from those who know that the top speed of the train will be 79 mph. Hardly "high-speed". Heck, people drive on I-94 faster than that. OK, so we're going 79 mph on the train from Madison to Milwaukee. A nice, hour long ride, right? Wrong! How many stops are in between? Sun Prairie, Lake Mills, Oconomowoc, Waukesha, Pewaukee? If you include only a few stops along the way, allowing for deceleration, waiting for passengers to de-board and to board, then allowing for time for the train to speed up again to a blazing 79 mph, only to have it slow down and stop again in 15 – 20 miles, now we're down to an average speed of about 46 mph. Hardly "high-speed".

This is a project we cannot afford. It is being paid for now by our grandchildren and great grandchildren. The annual operating costs will be paid for by increased taxes; yours and mine, more than likely through increased gas taxes, license fees, wheel taxes, and possibly tolls (more stimulus money for toll booths!!). A sure way to kill any fragile ecnomony we have now is to make it prohibitively expensive to drive. Keep in mind I'm not talking about just our little trips to work or the grocery store in the family sedan. Truckers will have to pay more for diesel fuel, increasing transportaion costs. Increased transportation costs will drive up prices on goods we will not be able to afford anyway because we're just trying to keep afloat financially because we're all paying $6 or $7 a gallon for gas. This will cause a ripple effect in the economy that I don't know from which we'd ever be able to recover.

Stop the madnesss. Stop the train.