Friday, January 6, 2012

A Cash Business

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No mortgage payments. A car title that's free and clear. No credit card debt. A fully funded retirement plan. These milestones in our financial lives are considered great achievements. Congress, however, continues to make open-ended obligations that are liabilities for our children.

In 2010 and 2011, Social Security paid out more than it took in. Medicare premiums from participants cover only 25 percent of the cost of the program. Veteran benefits – health, education, pension, commissary, recreation – continue to be added with no guarantee that the benefits will exist in the future for veterans in need. And all benefits and beneficiaries stand in the shadow of U.S. Government debt that's $15 trillion and counting.

Uncertainty is the bane of planning. People plan for the future based on what they know today. They need certainty.

Individual retirement accounts (IRAs) and 401(k) plans – though unequal in their benefits – provide certainty with tangible accounts that won't vaporize when future legislators change the benefits game. Sure, there is always investment risk. But I'd rather take that risk and responsibility myself than leave it in someone else's hands.

Recipients need to know what's in their pocket with certainty. Government needs to know its bill each year with certainty. So I propose that – to the greatest extent possible – Government move toward a cash basis so that all revenue is received and all benefits are distributed in the same fiscal year.

Here's what needs to happen to the current benefits scheme:
  • Fulfill all commitments made to all current beneficiaries
  • Begin to raise the age for Social Security and Medicare to 70
  • Increase Medicare premiums for new participants that can afford it
  • Cover the entire cost of Medicare for those without sufficient income
  • Offer Social Security's "safety net" to new participants that need help
  • Move to a tax system that puts personal savings before program benefits
  • Cover all healthcare for those military members injured in the line of duty
  • Put cash into "veteran benefit accounts" beginning with the first day of service for each member to pay for retirement, healthcare, and education
Certain. Known. Tangible. We strive for these comforts as individuals. It's time Government did, too.