Once upon a time, West Virginia’s state teacher’s pension fund was only 12 percent funded, making it the most underfunded pension plan in America.
Today the plan is 58 percent funded as part of 40-year plan for full funding.
Earl Ray Tomblin is a big reason why. In 1995, Tomblin became Senate president after serving as Senate finance chairman. Along with House Finance Chairman Bob Kiss and Gov. Gaston Caperton, he worked to get the state to invest its pension money in the stock market just as 49 other states did and still do.
Being Democrats, they ignored the state constitution, which led to the state Supreme Court thwarting the plan. In 1998, under Republican Gov. Cecil Underwood, voters overwhelmingly gave the state permission to invest taxpayer pension fund money in Wall Street, and the state did.
President Obama ought to hire Gov. Tomblin to run Social Security, which despite a $2.7 trillion surplus sitting in Parkersburg, will run out of money in 2033. That’s because we manage the money wrong.
Instead of investing in the stock market, Social Security buys federal debt.
That’s foolish. Yes, the stock market plunged in 2009, but it soared in 2012. All in all, stocks do well. Over the past 10 years, the S&P 500 averaged annual growth of 7.4 percent.
Meanwhile, Social Security collects 3.6 percent a year from the federal government.
At these rates, stocks would do $6 trillion better than federal debt by 2033. Instead of depleting its trust fund, Social Security would have the money to pay benefits for a long time.
Poor management of the fund, not benefits, is why we are running out of money. The benefits are miserly. According to the Urban Institute we shortchange retirees:
The average male who retired in 2010 paid $300,000 in Social Security taxes and will collect $277,000 in retirement, based on his life expectancy.
His female counterpart will collect $302,000
If they married, they paid $600,000 in and will collect $579,000.
True, many retirees live long enough to collect what they paid in and then some.
But Social Security benefits are calculated so that most taxpayers will die before they collect the money they pay in.
Ask Bernie Madoff how it works when you try that in the private sector. He’s serving a 150-year prison sentence for his Ponzi scheme.
By investing in Wall Street, Social Security should have enough money banked to refund at age 65 that $300,000 paid in with a little interest.
With that money, a person could buy a 60-year annuity to cover him until he was 125.
Instead of collecting $18,000 a year from Social Security, he would collect $28,000 a year.
If he dies before age 125, his heirs will inherit the money.
If he makes it to 125 -- well, he won’t. The oldest person in world history since Biblical times was Jeanne Calment of France, who died at 122 in 1997.
We are doing Social Security wrong. If the stock market is safe enough for state employees in 50 states, then it is safe enough for their employers.
In 1935, Congress created Social Security on a vote of 365-30 in the House and 76-6 in the Senate. This was truly a bipartisan program, Contrary to popular belief, Republicans overwhelmingly supported the Social Security, 81-15 in the House and 16-5 in the Senate.
The law was good for its time. Times have changed. It’s time to change Social Security.
Just as it was time to change the way West Virginia handled its teacher retirement plan -- without reducing the pensions of anyone.