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Social Security Reform Thursday: Week Thirty-Three -- African-Americans Need A Better Deal.

Thursdays are good days for reform, because they fall between Wednesdays and Fridays. And reform is a long-haul process, not a fleeting event.

That's why WILLisms.com offers a chart or graph, every Thursday, pertinent to Social Security reform.

This week's topic:

The Current Social Security System Is A Bad Deal For African-Americans.

Astoundingly, in the wake of Hurricane Katrina, some on the left are arguing that this (and this) proves the failure of small government conservativism.

Which is funny, considering how much entitlement spending has grown in the past several years.

Only a left-wing partisan kook could look at the Katrina situation and conclude that:

1. The federal government (and only the federal government) failed miserably.
2. Thus, let's expand the federal government.

It makes no sense.

Hurricane Katrina could be yet another page in the book of evidence pointing to the necessity of an end to the stranglehold Democrats have on the African-American vote. But Democrats are not entirely clueless. They moved swiftly to politicize Katrina-- and make the alleged government failures about race.

Some, such as Senator Hillary Clinton, are even claiming that this hurts the case for Social Security reform. To many liberals, stuck in the 1930s/1960s, reforming Social Security really means destroying it with no replacement or improvement or anything. It means leaving people out in the cold, on their own, with no retirement benefits. Every man fending for himself. Robbing the poor to pay the rich. "Fatcats" laughing all the way to the bank. And so on. It would have meant that the thousands of displaced Americans would have no Social Security check to count on in a time like this, they erroneously assert.

But no plan put forth by President Bush or any other Republican in Congress does this, or anything remotely like it. Social Security reform is not about taking anything away from poor people, it is about empowering them. Social Security reform is about providing incentives for the poor to work, and save, and accumulate real assets, real wealth. The average African-American would receive much greater benefits under the President's plan than under the current system. For many liberals, though, if the benefit is not explicitly paid out by the government (and instead is paid by an interest-earning personal account), it doesn't count.

It is important to note that, despite the progressive structure in the calculation of Social Security benefits, the average African-American woman receives far less in Social Security retirement benefits than a white woman. And not only that, but less African-American women receive Social Security retirement benefits (while more receive disability benefits) in the first place:

Incentives at work. Or, not at work. But isn't Social Security supposed to be a poverty program? Or is it a retirement program? An insurance program? Who can even remember anymore.

Incidentally, concerns about Social Security reform wrecking the disability claims of millions of sick and poor Americans are misplaced. Every Social Security reform plan on the table today keeps the disability portion of Social Security untouched.

Right now, African-Americans in particular are getting the raw end of the stick on Social Security. Before it became a politicized, polarized partisan issue earlier this year, most African-Americans supported Social Security reform.

After all, black Americans, like all Americans, must see that Social Security is a broken system. Not only is it a bad deal for poor and middle income individuals, sucking away opportunities to invest, build, and pass on wealth, but (and, perhaps, more importantly) Social Security is facing a demographic iceberg that threatens the entire American economy.

Social Security reform (with personal accounts), however, would benefit poor minorities most of all, proportionally (.pdf):

Poorer elderly Americans, rather than depending on a monthly check in the mail, paid out entirely at the discretion of Uncle Sam, would accumulate a nest egg they could pass on to their children and/or spouses. Rather than spending an hour of every 8-hour workday working just to contribute to a failing system with miniscule (or even negative) returns, Americans will be able to take the money earned during that hour and convert it into meaningful compound-interest-earning wealth.

Let's get real, here. Poverty is way down in America. Wealth is up. Inflation is low. Interest rates are low. Crime is down. More people are working than ever before. Our economy is something to behold, and something nearly every country on earth could and should emulate.

But in some communities, both rural and inner-city, poverty lingers. And it lingers in a big way. Despite a progressive benefit structure in Social Security (and exponential growth in other poverty entitlement spending), elderly African-Americans, many of whom may have worked their entire lives, still face poverty rates around 30%.

And that's because the incentive structure is all wrong. It's also because we are robbing poorer Americans of the power of compound interest. The system, right now, is stacked against African-Americans:

...because of differences in life expectancies and marriage rates, on a life-time basis the income transfer from blacks to whites is as much as $10,000 per person.

It makes no sense.

And while the prospects of a comprehensive reform plan passing this year, or even next year, are not particularly great, the chances of GROW Accounts passing is exceedingly high.

If you haven't been paying attention, GROW Accounts essentially take the surpluses the Social Security Trust Fund will run over the next decade and put them into personal account lockboxes. Lockboxes owned by individual Americans, not subject to the spending whims of Congress. Lockboxes that will prove to skeptics that personal accounts are nothing like gambling retirement away on the craps table.

In the wake of Katrina, there are calls from many to fundamentally change the way the government works. I couldn't agree more. But let's apply proven and successful stimuli, not revert to antiquated and failed European-style socialism.

The clock is ticking.

Previous Reform Thursday graphics can be seen here:

-Week One (Costs Exceed Revenues).
-Week Two (Social Security Can't Pay Promised Benefits).
-Week Three (Americans Getting Older).
-Week Three, bonus (The Templeton Curve).
-Week Four (Fewer Workers, More Retirees).
-Week Five (History of Payroll Tax Base Increases).
-Week Six (Seniors Living Longer).
-Week Six, bonus (Less Workers, More Beneficiaries).
-Week Seven (History of Payroll Tax Increases).
-Week Seven, bonus (Personal Accounts Do Achieve Solvency).
-Week Eight (Forty Year Trend Of Increasing Mandatory Spending).
-Week Nine (Diminishing Benefits Sans Reform).
-Week Ten (Elderly Dependence On Social Security).
-Week Eleven (Entitlement Spending Eating The Budget).
-Week Twelve (Benefit Comparison, Bush's Plan versus No Plan).
-Week Thirteen (Younger Americans and Lifecycle Funds).
-Week Fourteen (The Thrift Savings Plan).
-Week Fifteen (Understanding Progressive Indexing).
-Week Sixteen (The Graying of America).
-Week Seventeen (Debunking Myths).
-Week Eighteen (Debunking Myths).
-Week Nineteen (Reform Needed Sooner Rather Than Later).
-Week Twenty (Global Success With Personal Accounts).
-Week Twenty-One (GROW Accounts: Stopping The Raid).
-Week Twenty-Two (Millions of Lockboxes).
-Week Twenty-Three (Support for Ryan-DeMint).
-Week Twenty-Four (KidSave Accounts).
-Week Twenty-Five (Latinos and Social Security).
-Week Twenty-Six (AmeriSave).
-Week Twenty-Seven (Cost Of Doing Nothing).
-Week Twenty-Eight (Chile).
-Week Twenty-Nine (Entitlement Spending Out Of Control).
-Week Thirty (Reform Better Deal Than Status Quo).
-Week Thirty-One (Social Security As A Labor Cost).
-Week Thirty-Two (Social Security And Dependence On Government).

Tune into WILLisms.com each Thursday for more important graphical data supporting Social Security reform.

Posted by Will Franklin · 15 September 2005 04:14 PM

Comments

Posted by: Zsa Zsa at September 15, 2005 04:29 PM

Posted by: Sam at September 16, 2005 08:28 AM

Posted by: Phaedrus at September 16, 2005 10:10 AM