A College Fund on the Social Security Model
How Will the Government Afford Its Social Security Obligations?
William Conerly is president of Conerly Whelan Inc., a Portland, Oregon, investment management firm, and a consultant to Control Your Future, a non-profit organization focused on Social Security.
Thanks to Social Security, my wife and I have discovered how to guarantee our children’s college education without any sacrifice on our family’s part. No, we aren’t so old that our retirement checks will go directly to the university. We have an even better method: our family has adopted the Social Security model for a college trust fund.
It began when our 10- and 12-year-old children started asking us what college is like. After we described the wonders of exciting lectures, late night bull sessions, and the newfound freedom for parents, our older son asked if it cost money to go to college. What an ugly question!
Later that evening my wife and I agreed that we ought to start saving some money for the kids’ college education. But how to save? As we walked around the house, we saw the crumbling infrastructure. Well, not really crumbling, but the house is in need of some fresh paint and a decent lawn irrigation system.
Then there were the pressing social needs. The spring-break ski week helps to bring us together as a family, and the evenings out with my wife are vital to maintaining a solid marriage. What more pressing social needs could there be?
My wife proposed cutting back spending on computer games, to which I agreed. But the children pointed out that the games are an investment in the future, because both boys expect one day to make millions as game designers, or at least thousands as professional game testers. Who can be against investments in education and technology? Thus, we just couldn’t cut the current budget, despite the looming college crunch.
A Great Idea
The great idea came when I studied the Social Security Trust Fund. I called a family meeting to announce the establishment of the Conerly College Trust Fund.
“Where will the money come from?” my wife asked. I assured her that we would put money into the fund, but not have to cut our current spending.
“How will the trust fund be invested?” asked my older son, who has a budding interest in the stock market.
“The fund will buy Conerly Bonds,” I explained, waiting for cries of understanding and adulation. The family fell silent, so I explained: “We’re following the Social Security model here. The Social Security Trust Fund buys bonds issued by the U.S. government. So, the Conerly College Trust Fund will buy bonds issued by the Conerly Family.”
Still no response. “You see, a bond is just a loan. The trust fund will lend the family the money we need to continue spending on our infrastructure needs, social needs, and investments in the future. That way the family continues to spend as ever before, while the trust fund grows to a nice fat sum. I just hope that you kids can get into a college expensive enough to use up all of our big trust fund.”
My younger son, who had been silent up to now, didn’t understand. “But how will we pay off the Conerly Bonds? If the family isn’t able to pay for our college without the trust fund, how will the family be able to pay off the bonds when we turn 18? I don’t get it.”
“Don’t worry, son,” I told him, “there are some things that Daddy just can’t explain. But I’m sure you’ll be able to understand it after you’ve gone to college. I suggest you study economics.”
Comment by charles braly on 8 January 2009:
when put into the family context, the idea sounds stupid, doesn\\\\\\\\\\\\\\\’t it? that\\\\\\\\\\\\\\\’s because it is !
…. but, there is an even bigger problem.
why should a father recommend something that sounds so stupid? doesn\\\\\\\\\\\\\\\’t that make him sound stupid, too?
when the kid watches his father continue to pay into social security, without any opposition, the kids will get the idea that the government will somehow take care of it, and they start thinking that\\\\\\\\\\\\\\\’s the way it should be.
a guy like Madoff is threatned with jail for a ponzi scheme, and the legislators who created an even worse social security ponzi scheme stay on the outside… !!!
Yet, politicians will be the ones in charge of turning America around, with even more such spending…. ( only, this time, without any big mistakes along the way…. yea, right !!)
when children see the unwillingness of their parents to stand up in opposition to letting the government be responsible for everyone — the parents are giving a wrong signal to the kids….
it is time that the parents try to understand the root causes of these big economic problems which the nation now faces.
it is time for parents throughout the country to try to understand ways to teach kids a proper way to get what they want…. by being responsible for themselves and to realize that government does not do anything without first stealing the money to do it from its citizens…. now, or in the future by creating bogus money, issuing the notes (liabilities) which will need to be paid by future
generations.
I see this little story as a feeble attempt to teach.
Comment by marticia on 9 January 2009:
Mr. Braly it is just a bit of tounge in cheek. You know with some things if we do not laugh we will cry. Both are good tension relievers. Actually, to be serious, a good social program should be able to pass the acid test of reality, don’t you think?
Pingback by Social Security Ready to Call in Treasury Loans | The Freeman | Ideas On Liberty on 16 March 2010:
[...] Timely Classic “A College Fund on the Social Security Model” by William B. [...]
Comment by AnnInFL on 17 March 2010:
Great story. This simple analogy reveals Social Security for the scam that it is. I’d like to post this far and wide.
Comment by Jon Ogden on 16 May 2011:
Amazing to think that Reagan sold this concept to conservatives as fiscally sound and a way to cut taxes.
Comment by Kevin L on 16 July 2011:
You left out the explanation that comes six years later. When the time comes for the elder son to go to college, dad informs the younger brother that it’s his duty to get a full time job and repay the Conerly bonds so his older brother can enjoy college.
How sad that 12 years later, nothing has changed for the better.
Pingback by Ponzi Unmasked | The Freeman | Ideas On Liberty on 2 September 2011:
[...] spare cash and must borrow from the public. Hence, intra-agency debt transforms into public debt. (This Freeman article imagines trying to run a family college fund like Social [...]
Pingback by Social Security, a Ponzi Scheme Unmasked: by Sheldon Richman « CUT DC.COM on 4 September 2011:
[...] spare cash and must borrow from the public. Hence, inter-agency debt transforms into public debt. (This Freeman article imagines trying to run a family college fund like Social [...]