Opinion
Social Security for future generations
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Also by Matthew Clausen:
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- As the dollar falls (December 8, 2004)
- Material world of gifts (November 30, 2004)
- Reinvest in education (November 17, 2004)
- The freedom to err (November 10, 2004)
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Social Security may have been a “New Deal” program, but 1935 is no longer “new.” During a period of severe economic depression that was causing the premature deaths of elderly citizens, a program to allow the elderly to afford their food and housing represented a humanitarian success. But now we need to re-evaluate the rusted Social Security system.
Originally touted as an insurance program for the elderly, it has become a forced retirement system for all Americans. Some still argue that Social Security technically is an insurance program, because it is a “guarantee,” with none of the risks involved with investing retirement money on one’s own. Also, the taxed money goes into the collective pot for those currently in need, not for the individual contributing it — a “pay as you go” system. Hence, it is argued, your paying for retirees now insures future generations will pay for you.
But there is no assurance that this policy will pay out for you. Plus, no options exist to manage your own money that Social Security demands from each check. Instead, Uncle Sam says you work now, and he’ll pay you an allowance when you’re older, because you’d just blow it all on candy anyway.
Truthfully, Social Security intends only to augment personal savings upon retirement. But inadvertently, the program has encouraged many individuals to not bother saving up, because they believe that 12.4 percent of their income still awaits them when they turn 65. That’s no rainy-day savings account the government has been holding for them, though. Their money is gone, and they’re going to get just a little cash each month, provided by the taxation of the working generation.
But those working generations are thinning out. Back in 1950, following the baby boom, there were 16 working adults to every one person receiving Social Security. Today, there are only 3.3 workers per recipient. In 40 years, the Social Security’s Trustees Report predicts two workers for every recipient. How will a fraction of the average two paychecks in America support an elderly person, especially when life expectancies keep getting pushed further and further back?
Even the conspiracy lovers who think every government document is a forgery can recognize the impact the retiring baby boomers will have on the Social Security system. In fact, by 2018 (that’s only 13 years from now, remember) the revenue for Social Security is predicted to precariously equal the expenditure in benefits, and then afterward operate in deficit. People are having fewer children; the nation’s population growth rate has thankfully slowed. If ignored until 2042, the Trustees Report calculates that either the Social Security payroll tax will have to jump up to 16.91 percent or else benefits must be shrunk by 32 percent to counter these deficits.
Social Security should have been a temporary fix, but now it has enmeshed itself into American society. The move to allow individuals the option of investing their Social Security into mutual funds offers a push toward freedom. It is the individual’s money and the individual’s retirement: the individual should have the choice in how they prepare for retirement. If some people still want a bogus “insurance” program that can’t pay out the benefits because of a faulty system, they can stay with it. For those willing to take the risks and do their research, let them exercise their rights to private ownership and investment. Social Security finds itself in an era it was not made for and heading into one it cannot support itself in.
Some point out the roughly $2 trillion it will cost to set up individual investment options. However, compare that to the $3.7 trillion over the next 75 years that the government will have to transfer to Social Security from other revenue sources to maintain the program: that’s $1.7 trillion in savings. Perhaps you missed that: that’s $1,700,000,000,000 in savings.
However, some opposed to the Social Security reformation claim that the public can’t be trusted with their money. They argue that many people (mainly through “bad luck”) will end up losing their Social Security money to the terrible risks of the stock market. That’s why mutual funds are being primarily discussed: substantially decreased risk of loss. And undoubtedly some years are worse than others on Wall Street, but over time the stock market has proven itself a valuable companion for retirees maintaining a nest egg.
Let’s look around and recognize that by the time we hit 65, Social Security won’t much be there to help us, after all the money we’ve poured into it, if we don’t start reform now.
Matthew Clausen (mgclausen@wisc.edu) is a junior majoring in English.
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It's not that people would blow it on "candy"; it's that they can't save up a lot of money for retirement and pay for health care too. Most people who do save money get matching funds or full funding for a 401k; if your job doesn't offer that, saving enough money to support you in your old age becomes very difficult.
One way or another, we'll end up supporting people who, for whatever reason, couldn't save enough to make it through their retirement.
"Originally touted as an insurance program..."
Any insurance company run like SS would result in long prison terms for all concerned.
Since when did Ringo start writing for the Herald?
Social security isn't a retirement plan; it's risk-free dignity insurance for the elderly, the disabled, and widows and orphans.
If you don't understand that, you shouldn't be commenting on it.
No, Social Security is a poorly designed pyramid scheme.
By the way....how much money is the Bush tax cuts gutting from the federal coffers?....$19 trillion dollars. That's right...that's a shit-ton of money disappearing from the federal government (something Republicans all go...so what over) and yet...if you took just a bit of that money out and sent it into SS, it's saved for 200 years.
We have options, we have choices, and the 2042 number thrown around by everyone is the most pessimistic prediction that SS makes about its solvency...that means that not being able to pay out 32% of it's benefits (which means it does pay out 68%) is it's worst case scenario. And the worst case scenario predictions made by SS have been wrong for the last thirty years.
There are options for SS and saving it...many different ones...but not many that the right is willing to consider.
-=Rob Deters=-
The assumption is made here that private accounts will make more than social security. There is no way that they will. That's why this whole thing is bullshit. I don't trust the fucking stock market any further than I cna throw it. Fucking Republicans think its the solution to everything. They're so fucking stupid.
It's amazing how often swearing indicates stupidity. Social Security gets a horrible return. Even putting your money into T-bills would get a better return. Or a savings account. You don't have to put it in the stock market, or you can put some in (the stock market historically returns about 7%, even if its growth declines by half it will still outperform many investments).
Why should you not be allowed to choose.
Do you think we're all foulmouthed morons?
Lower rates = lower risk. Ideally, SS means no-risk. Everyone can live in dignity in their old age.
Wow, this a nice synopsis of the Republican talking points. First, tell everyone that Social Security is a retirement program, not a social insurance program. Then ask why we can't let everyone invest a little of their own money. Ignore the cost of brokers and the implication of the government pouring billions of dollars into wall street (now, when Citibank donates 100,000 to the RNC, they can be sure that the RNC will but millions directly in Citibank's pockets...)
It is not a terrible idea, but it does not work. Britain tried it, and so did Argentina. Brokers took a big chunk, and when some people did not have enough to live off as promised, the government was forced to step in (by a public who has come to expect that being old and poor does not mean you should be homeless and hungry).
If you want to write a column about fixing social security, try a balanced approach, like explaining how small changes here and there will stave off this "crisis" which is 40 years away. Don't just parrot RNC talking points--it makes you look like a fool.
How's this for risk?
College-aged people will pay a ridiculously high premium into social security, take on tremendous risk that benefits won't exist when they retire and most likely get a minimal return on that "investment", assuming they actually get one.
No thanks. I'd rather unplug before I start. I can do a much better job setting up my retirement than the government can.
Of course, the old folks need my money to pay for their retirement because they were stupid enough to believe FDR and other politicians when they said that folks were paying for their own retirement when they paid social security taxes.
All that money is gone. The bank is bone dry. Pay for your own ****ing retirement. Why do I have to pay for both mine and yours just because some politicians lied to you?
"Why do I have to pay for both mine and yours just because some politicians lied to you?"
Because if you were starving in the street, we'd pay for yours. We Democrats are just nice people.
>>
"Why do I have to pay for both mine and yours just because some politicians lied to you?"
Because if you were starving in the street, we'd pay for yours. We Democrats are just nice people.
>>
Those precious Democrats - always willing to give other peoples money away. Robin Hoods every one!