On September 11, 2015, Merrill Matthews writes on RARE:
Pity the poor Millennials. The government is robbing them blind.
The Pew Research Center defines a Millennial as someone between the ages of 18 to 34 this year, and there are 75 million of them, slightly outnumbering the Baby Boomers (ages 51 to 69).
The Millennials are better educated than any previous generation, and they are diligently working and paying their taxes—when they can find a job in the Obama economy.
They have been doing it right. But the government has been doing them wrong—because it’s been taking a large portion of their tax dollars to subsidize the Baby Boomers and older American entitlement programs.
And all of those entitlement programs are on a fast track to financial collapse—all of them.
Take Social Security. Millennials kick in 12.4 percent of their earned income (half from the employer and half from the employee) to the Social Security Trust Fund. The government uses that money to pay current retirees. When there’s a surplus, the balance is added to the Trust Fund, which is currently about $2.8 trillion.
The problem is, the government then borrows that money, writes itself an IOU, and spends it.
But even including the Trust Fund “assets,” the Social Security trustees estimate that the government will only be able to pay about 79 cents on the dollar in benefits by 2034—when the leading edge of Millennials will be in their mid-50s.
Several years ago, pollster Frank Luntz asked younger workers whether they were more likely to believe in aliens or that Social Security would still be there when they retired. Aliens won.
The Social Security payroll tax also pays for disability benefits for those who are injured or disabled and can no longer work. But Millennials can probably kiss that safety net benefit goodbye. The trustees claim Social Security Disability Trust Fund reserves “declined to 40 percent at the beginning of 2015, and the Trustees project trust fund depletion late in 2016.”
And then there’s Medicare, the health insurance program for seniors. Millennials contribute 2.9 percent of their earned income (again, half from the employer and half from the employee) to the Medicare Trust Fund, known as Medicare Part A, which pays for hospital bills. According to the trustees, it will make it to 2030, 15 years from now, after which time it will only be able to pay 86 cents on the dollar of hospital costs.
So while Millennials are dutifully paying into these programs, and while seniors (mostly) are gladly spending that money, it isn’t at all clear that these programs will exist when it’s Millennials’ turn, at least in their current form.
There is talk of reform, but almost all the proposals are some variation of cutting benefits or raising taxes or both, which will not solve the programs’ long-term financial problems. There’s only one way to do that in an actuarially sound manner: move to personal, pre-funded accounts—that is, allow workers to put that same payroll tax money into a personal, broadly diversified retirement account.
There are people who claim this approach is a “risky scheme,” and that Americans will be day trading with their funds.
But not if we establish accounts that invest in a broad index fund and leave them there. For example, since 1980 the S&P 500’s average annual return has been 13.3 percent (not adjusted for inflation and with dividends reinvested).
Yes, there are some scary stock market drops, like 37 percent in 2008, but also some great gains, like 32 percent in 2013. The point is that long-term investing in the U.S. economy yields enormous gains.
Most importantly, that money would belong to Millennials—not me and my Baby Boomer companions. To paraphrase Margaret Thatcher, we’re about to run out of other people’s money, and Millennials will be left empty-handed.
The good news is that safety net challenge provides an opportunity for Millennials to demand that politicians propose a way to transition to personal, pre-funded retirement accounts. It won’t be easy or cheap, but it’s the only way for Millennials to keep from being robbed.
http://rare.us/story/the-government-is-robbing-millennials-blind/
What we really need to do is enable EVERY citizen, no matter what age, to invest in FUTURE productive capital formation, not in secondhand securities in the security market gambling casino. Returns on new productive capital investment range from 25 percent to 65 percent.
One approach to democratizing the capital credit needs of the U.S. economy is to enable every citizen to establish a Capital Homestead Account or “CHA” (a variation of the Individual Stock Ownership Plan [ESOP] concept) at his or her local bank to receive direct personal access to capital credit as a fundamental right of citizenship. With access to monetized credit through a CHA, each citizen from birth would have the funds to invest, with the help of an investment advisor, in full dividend payout shares of 1) the company that he or she or a member of the family works for, directly or through an Employee Stock Ownership Plan, 2) the companies he or she regularly buys from, directly or through a Consumer Stock Ownership Plan (CSOP), 3) a community investment corporation to link him or her to profits from and control over local land development, and 4) a variety of blue-chip growth companies with a history of profits. Capital incomes earned from dividends on one’s CHA account offer a private sector supplement to prevent bankruptcy of the pay-as-you-go Social Security system, which is funded by equal worker and employer contributions of 6.2 percent each, with additional Medicare senior health insurance funded by combined contributions of 2.9 percent.
Under conservative projections, a citizen could accumulate from birth to retirement a tax-sheltered estate of $200,000. Furthermore, over that period, he or she would receive dividend income totaling over $750,000, and at retirement an estimated annual CHA dividend income of $30,000.
Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice
Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.
The American Dream. That’s what we were brain washed to believe. My advice for the new generation of college students. Beware yes college was the way to a better, more successful life, but this isn’t the situation anymore. We are taught in High school the a college degree guarantees more money, the ability to support a family, and buying a house. This is not the way anymore.
In my personal situation and millions more in similar situations. The American Dream is a SCAM. They only set us up for failure.
In my personal situation, I relocated from a border town I was growing up in because the big companies moved south of the border because they could profit more and pay workers less. So I relocated to Central Florida. I left my University and met with a few different schools. One in particular said they were Certified and I would achieve my Bachelors degree in half the time I would at University accept I would have to dedicate myself more hours so it would be impossible to work even a part time job the class schedules would change monthly. I made the sacrifice and took private loans out from Sallie Mae. My mother consigned these loans at the time she was making a decent income. My plan was after graduating I would join the military and go in as an officer. Once graduated the military said we don’t recognize this school as a nationally accredited college. So my Bachelors means nothing to them. I’m in debt over 100k. My mother’s as well as my own credit score is ruined even though we manage to barely get by and make my student loan payments each month.
Then the economy collapsed. My mother’s company downsized and completely closed her yearbook publishing company. Technology took place of her publishing company and people were no longer needed. My father’s had to sell his auto shop. Now my mother and father are making minimum wage. I’ve paid my student loans which are federal and private consistently for 10 years. The debt amount has only increased. I only pay 4% interest but it’s still $400 dollars a month out of my pocket. I don’t have a job in my field of study. I will never be able to buy a house or new car or start a family. Like I said from before the American Dream is a SCAM. We need to fight to get un-accredited schools like this closed and Companies like Sallie Mae to stop giving out these outrageous loans, raise the minimum wage, keep companies from, moving south or overseas for cheap labor costs and offer complete loan forgiveness to hard working citizens at least for the federal loans. I’ll be stuck paying these loans until I’m 65 years old. I would have been better off finding a trade and starting my own small business.