Ron Paul has released his proposed plan to cut $1 trillion from the federal budget in the first year, if he were to win the presidency. His plan claims to balance the budget within 3 years.
There are a lot of cuts in Paul's proposed budget, including ending the wars and mostly eliminating 5 departments. One thing that Paul's plan does not change is so-called entitlement spending. It does not address Social Security and Medicare, in the sense that it keeps the status quo with these programs.
For any senior citizen who cares deeply about receiving his Social Security checks, Ron Paul should be his man. While Ron Paul has said that these entitlement programs are unconstitutional and should never have been started, he has also explicitly said that he does not plan to eliminate them and pull the rug out from senior citizens who have been promised these benefits.
Ron Paul is the only major candidate (if you don't count Gary Johnson) who has proposed significant spending cuts that are specific. He is the only one (besides Gary Johnson) who comes anywhere close to a balanced budget. Because of this, he is the only one who could actually save Social Security in a sense. If we get any of the other candidates, then not much will change and the fiscal situation of the U.S. government will continue over a cliff. Senior citizens will eventually be devastated when there is no money to pay out Social Security.
Of course, the Fed can always create new money out of thin air so that the Social Security checks can keep going out. But then there will be more tampering with the CPI figures so that the checks do not reflect the actual inflation. If the government uses the Fed to create new money to pay for Social Security, then this will be a hidden default. The Social Security checks will be worth less in real terms. That is already what is happening now. So, in a sense, Ron Paul is really the only one who will save senior citizens from having a big and sudden downgrade in their standard of living.
Ron Paul has been questioned about so-called entitlement spending. He says that he favors reform, but that his near-term spending plan does not address that. He says that he would like to give the option to anyone under the age of 25 to opt out. He acknowledges that he gets objections from people who are over 25 who say they would like to opt out.
I have a great deal of admiration for Ron Paul and support him. But there is a "but" on this one. I don't agree with him on this opting out for those under 25. Just as he acknowledged, why not let those over 25 opt out? Fiscally speaking, it actually makes more sense to do this.
If Paul's plan is to make good on the promises made to those who are currently retired or soon to be of retirement age, then money has to come from somewhere to pay those people. The Social Security trust fund is made up of IOUs. There is no actual money in there. If you let people who are under 25 opt out, then that will be less money collected to pay for the current recipients. Those under 25 will still be paying for current recipients, although maybe not as much. There would be more dipping into the general fund, which would spread it around to everyone. Those over 25 and working would actually be getting taxed more to pay current recipients.
If you let those under 25 opt out, you don't get the financial benefit until over 40 years from now when they don't get to collect anything. Meanwhile, tax collections will be less as people opt out. Wouldn't it be better to let someone opt out who is 50 years old? That person has already paid into the system for about 30 years and he might be willing to give up all of his so-called benefits if he doesn't have to pay that payroll tax anymore. You'd be surprised at how many people would take that deal. If I were 50, I'd rather keep my money now than get some promise for 15 or 20 years in the future.
I am all for letting people opt out of Social Security, but it should be offered to everyone. But that does not help solve the fiscal mess that we are in now. The money paid to current recipients still has to come from somewhere.
There is no easy way out of this. The best plan I know of is what was presented by Harry Browne when he was running for president. He said we should sell off government assets and pay off the Social Security recipients. The federal government owns a lot of land (some with oil) and a lot of buildings. I think the federal government needs to go through a bankruptcy much the same way a corporation would. Let's sell off all of the good assets and pay the creditors what we can. In this case, let's not reorganize this bankrupt entity. Let's keep it out of business for good.