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Dock Treece

Dock David Treece is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and is licensed with FINRA through Treece Financial Services Corp. He provides expert…

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Social Insecurity

As the clock ticks down to August 2nd, the debt ceiling debate has grown more heated as of late. As it turns out, doubt in the 'full faith and credit' of the United States' federal government can actually inject quite a bit of fear into the world's financial markets. This fear has led to a substantial rise in volatility as investors focus increasingly on gossip and headlines instead of levelheaded rationality.

Much of the debate has become focused on entitlement programs like social security - at least ever since President Obama made his now-famous threat to cut off benefit checks to veterans and the elderly on August 3rd if no agreement is reached to prevent a government shutdown.

This offhanded comment has been a favorite among political pundits, though it was obviously a scare tactic and a complete bluff. Sadly, it seems many Americans have taken the bait. Many have fallen in line since Obama's threat and opened up to the idea of raising the debt ceiling, showing their flagrant need for the nanny state.

Unfortunately, this is precisely the wrong lesson to have learned.

Rather than acquiescing to the government's desired role as wet-nurse to the governed, Obama's threat should have reminded the American people of our President's shamelessness and willingness to threaten and/or hurt this country's citizens to accomplish political ends.

Just as significantly, the entire debate surrounding social security has highlighted a complete misunderstanding by the American people for how the program is structured and what purpose it serves.

The Social Security Act was passed in 1935 - some may recall that the United States economy was in the middle of a minor slump back then, commonly known as the Great Depression. At that point in time the average life expectancy was almost a full twenty years shorter than it is now. Jobs were harder, medicine was less advanced, and many aspects of modern life were luxuries reserved exclusively for the ultra-wealthy.

Consider one quick example. In 1936 a ticket to fly between Germany and New Jersey cost roughly $400, almost a quarter of the average American's annual wages at that time. For comparison, $400 in 1936 would be worth more than $6,000 today, given inflation. And this ticket didn't even get you on an airplane - that was the price for travelling on the Hindenburg, not exactly a quick (or safe) undertaking.

When social security was begun in the '30s, the vast majority of elderly or disabled Americans lived with their families. Nursing homes were not a thriving industry back then, though there were some facilities operated by local church groups and other charities.

At its core, social security was developed to keep its beneficiaries from becoming a drain on their caretakers. It was a way of helping their families pay utility bills and put food on the table.

Hardly what one would call a "retirement plan."

Social security was never meant to improve Americans' lifestyles after they retired - which in the 1930s really meant you were incapable of working anymore. It wasn't even supposed to allow those unable to work to extend the lifestyle they enjoyed while earning wages. Social security wasn't going to pay for cruises or new cars, these were luxuries enjoyed by very few, anyway.

Somewhere, somehow between 1935 and now, Americans have let politicians twist the role of social security; they've allowed the government to make social security sound like a retirement plan, when it isn't.

Now many Americans are upset because they might need to save for retirement above and beyond their contributions to social security. Well duh! Anyone who hasn't been saving in addition to social security has much more serious problems than not understanding government bureaucracy. [Heck, maybe they should run for office!]

Worse than the fact that Americans have been lied to about programs like social security is that they've actually taken the bait. Voters were dumb enough to believe Al Gore when he said he was going to put the money "in a lockbox." They were dumb enough to believe that there was actually money sitting in a fund somewhere to pay retirees.

Why don't the American people get it? Why are they so willing to see things the way they want, rather than as they are? A lie is a lie, no matter how much one wants to believe it. Social security is broke - there is no money. What's more, this isn't by accident, but by design. Social security is a legal, government-sponsored Ponzi scheme; the only one in the world, in fact.

Now, with the deadline to August 2nd closing in, the American people are being fed still more lies by the so-called "Gang of Six" in the Senate. The question is how many more lies can the American people swallow? How long until the dumbing down of America ends; and people in this country start waking up smarter than the day before?

 

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