- The Washington Times - Saturday, August 12, 2006

Although I am an AARP member, I strongly disagree with AARP’s stance on Social Security as presented by government affairs director David Sloane (Forum, Aug. 6).

Many of AARP’s arguments are not credible. For example, “AARP supports better diversification of Social Security funds so the system could earn higher returns while spreading the risks of investing.” Higher than what? Any invested returns would certainly be better than the non-investments and non-returns of the current system.

Surplus funds are transferred to the budget and spent. IOUs in the form of easily printed Treasury bonds mean that someone will have to raise taxes to redeem them in the future. Attention Mr. Sloane: There is no trust fund for the “better diversification of Social Security funds.” Diversifying Social Security funds would require cashing in Treasury bonds and buying non-government investments on the open market. That would require not spending the funds to begin with.

Politicians resist the private investment option because it would reduce the funds that are under government control and available for spending elsewhere. They are greatly motivated to retain control of funds that can be spent today in return for mere promises to provide retirement money in the future.

Even if citizens could persuade politicians to vote to diversify funds instead of spending them by, for example, investing in the stock market, there would be a large temptation to steer business to “politically correct” companies and to friend of contributors. That’s not a sound investment strategy.

According to studies by accredited economists, if the Social Security deductions of today’s retirees had been put into the equivalent of an indexed stock fund, they would be receiving several times as much as their current monthly check provides. Oh, yes. That would be primarily in interest payments and they would still own the principal to leave to their heirs and/or to pay for much of their rising health costs.

By the way, if private investments are so risky, why does AARP want “people to have a variety of assets and/or investments for their retirement.” Does AARP assume that we would be stupid only with the Social Security part of our investment but not with any outside funds that we invest? And why don’t members of Congress pay their “fair share” that they always lecture us about? Do they know a bad deal when they see it?

Certainly, if part of the Social Security tax could be invested, the participants who so choose should expect reduced benefits. For example, if one could elect to place half of his Social Security “contribution” into a stock fund investment, then his retirement benefit should be reduced by half. But it would make no sense to reduce the benefits of those who do not participate.

If the federal laws that prevent chain letters and other Ponzi schemes were to be applied to government operations, the current Social Security system would be declared illegal by any judge who accurately interprets the law.

Some South American countries have privatized their social security programs in recent years with great success. If our politicians are not smart enough to solve our system’s problems with ideas of their own, perhaps they might have the competence to copy something that actually works. Individual ownership of most of our contributions is one such way. I believe members of Congress are intelligent enough to see that such a system would be a great benefit to voluntary participants. Most merely lack motivation.

AARP could lead the way to help solve the Social Security problem by, for example, championing the elimination of earmarked items in budget bills. Bridges to nowhere and other earmarks costing billions could be applied to help solve these problems. That might put a damper on political contributions throughout the federal government.

TED DUKE

Reston, Va.

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