Social Security Trust Fund Fix

What is a practical fix for a trust fund that has run out of money, based on the facts of the situation ( http://www.thebiglie.net). The answer is relatively simple. Be honest with the American people! Our President needs to end the charade being perpetuated upon the American public in regard to the solvency of the Social Security Trust Fund. He should reveal in detail what occurred, instead of attempting to chip away at the federal government’s obligation to the fund. Once the truth has been told, recommendations to fix the fund can be adopted that will be beneficial to the country, the fund’s donors and its benefit recipients.

The obvious first step would be to recommend that the fund’s proceeds cease to be a part of the regular operating budget of the federal government. The task of fulfilling this recommendation may not be completed immediately as the federal government may have to be weaned off the proceeds from our payroll taxes to the Social Security Trust Fund. Nevertheless, a plan to do just that should be set in motion.

The next task is one that requires vision. Use what was meant to be bad for the Social Security Program and turn it into an opportunity for good. As the federal government makes good on its IOU to the trust fund, make sure a clear and unambiguous payment plan is established that will eventually rebuild the $2.5 to $2.7 trillion dollar trust fund over time. Following is a doable and practical suggestion to put the nation on a path to job creation, as a part of that rebuilding process. Its objective is economic development which includes the black community which is often overlooked and left out of such efforts. In doing this, Mr. Obama can take a page from the Lincoln Presidency’s playbook.  Just as President Abraham Lincoln financed the Civil War with the issuance of bonds, President Obama can finance an economic recovery through allowing 10,000 retiring baby boomers to take up to $40,000.00 of equity from their Social Security principle and having the remainder of that principle paid on a monthly basis. (Note: 10,000 baby boomers will retire everyday for the next 18 years).

This can be accomplished by adjusting how the Social Security Trust Fund is financed. The IOU of $2.5 to $2.7 trillion dollars owed the Trust Fund by the federal government, as it is being paid back in installments, will have to be invested in instruments other than federal government bonds to earn needed additional interest. The money that will be invested is the funds left after benefits are paid. The federal government should, after using the current payroll tax to pay benefits, make up any shortage and add several billions beyond the shortage for investments to rebuild the fund, each year. The amount needed to rebuild the fund on an installment basis can be mathematically calculated.  President Lincoln’s Administration laid the basis for the creation of modern day Wall Street, in that through the first of its kind bond issuance, government money dealers were used to sell the bonds to investors to finance the Civil War. President Obama can lay the basis of a new and different type of “Wall Street,” in that he can create dealers also, however “away from Wall Street.” These “new government dealers” can be women and minorities. They can be in far-flung places away from Wall Street, such as Florida, Ohio, California, Pennsylvania and other states, including Hawaii. In appointing women and minorities in large numbers as formal government dealers, Mr. Obama finally expands the power to deal money beyond the circle of white males and Wall Street.

However, our president has to summon the courage to tell the American people that in order for retiring baby boomers to take down up to $40,000.00 dollars from their Social Security principle, the Trust Fund will have to earn additional interest. The safest and most conservative way for the Trust Fund to do this is through the purchase of triple A (AAA) corporate bonds. The purchase of these bonds would be facilitated through this new class of government dealers appointed by the federal government. Mr. Obama, by doing this does two things immediately;

1) He lifts the economy out of this downturn as $400,000,000.00 million dollars ( 10,000 x $40,000.00 dollars ) begins to course through the economy daily as a result of the issuance of those checks to boomers and;

2) He shifts part of the center of power in dealing money to minorities and women. You see, power does not always have to come from making enormously large sums of money,and there is nothing wrong with that, but can come from making money consistently, day after day, month after month and year after year. These “new dealers” through commissions paid by the federal government will become accelerators and catalysts of additional economic activities within their surrounding communities, much like Wall Street dealers, due in part to their ability to provide an environment where seed money and risk capital can be raised. These dealers would be at the center of such activities. Indeed, as a part of their mandate, they could be required to educate the public regarding opportunities when it comes to economic development.

These “new” dealers because of the consistency and strength provided by the federal government will add the needed long term support for nascent economic development. The job of the new dealers would be to purchase “worthy triple A (AAA) corporate bonds,” for the Social Security Trust Fund over a period of time out of the $2.7 trillion owed the fund by the federal government thus buttressing the balance sheet of the Trust Fund and sustaining its viability.

The $400,000,000.00 million dollars entering the economy due to the velocity of money, in that money handed directly to consumers turns over at least one to two times, is really like $800,000,000.00 millions dollars a day being dropped into the economy. This infusion of capital will create demand for products and services resulting in JOB CREATION. The federal government, in not taxing the $40,000.00 dollars in partial distributions will create the incentive 10,000 baby boomers a day need to tap this new source of wealth. It is ironic! All this President has to do to affect historically high black unemployment(Blacks have experienced double digit unemployment for 5 straight years. This is not a recipe for building strong communities!) and put this country back on a productive job growth path is to tell the American people the truth. What could be simpler than that?!