Frabjous Times

I have not been paying very close attention to the Social Security debate, but I have heard enough to know that there are some claims I don't understand:

• These statements do not go together:
  • Currently, Social Security is a pay-as-you-go system; taxes collected go to beneficiaries or to the trust fund.
  • The proposed restructuring will not decrease the benefits paid out.
  • The new plan will have personal accounts which will go back to the taxpayer at such time as that person is eligible to receive benefits.
  • The new plan will not increase either the rate of personal contributions or the company portion of contributions.
  I don't get how the amount I pay in can stay the same, still cover the obligations to those drawing out from the system, help replenish the decreasing trust fund, and also appreciate in my personal account. How does it go to three places at once? Or if they are saying that the personal contributions are separate from the current amount I am assessed how is that different from my just taking that money and putting it into a 401(k)/IRA/SEP/Keogh/whatever as one can do currently (up to a limit)?
• The idea is that the personal accounts would grow with a better yield than the Treasuries that the current Social Security system relies on for a return. But since in the market, reward goes inversely with risk, doesn't this become significant only if one is allowed to make risky investments, belying the notion of “security?”
• The influx of a huge pool of private account money into the market would seem to be likely to distort the market itself, decreasing yields.
• Medicare has a trust fund in worse shape than Social Security, but I don't hear anyone proposing sweeping reforms for that program.

It feels to me as if this whole thing is just a nasty combination of the worst emotions a money manager can have: greed (for the wealth one can gain by owning one's personal account) and fear (of the consequences of the projected depletion of the trust fund based on some assumption-laden economic model). When it comes to Social Security, what I would like to see is a relatively small nest egg for the elderly and disabled, but one which has an ironclad guarantee on its solvency. This can be accomplished by other means which have been proposed such as tweaking the age of eligibility and opening up the kinds of investments the fund can participate in.