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 ([email protected]) is a junior majoring in English.