It's that time again when the folks who always wanted to do away with Social Security are at it again to "save it" or "fix it". A little satire from 2005 when they last were going to save it.
IT’S TIME FOR ANOTHER SWIFT MODEST PROPOSAL
A modest digestion for solving the “urgent” Social Security Problem and curing other enigmas that ail our Greater Society; thereby relieving grandparents the burden they place upon their progeny and thus transforming them from being a liability to their Society to one of benefit for the Public Good
by
Victor Volpe
After sixty-five years1 of beneficial existence under a self-funded social welfare retirement insurance system for our elderly in the most prosperous society ever in history, we are now being told that we have a Social Security Problem. It seems that the money is finally running out of the system and that we will be flat broke in several more decades and that we need to fix this critical problem now. Presently there is much discussion and debate over how to solve this problem. Even Republicans, Conservative Republicans at that, profess a newly found eagerness to save the Social Security System after decades of trying to undo it. The Administration’s statements addressing this situation as a “crisis” or “problem” are as vaporous as the Administration’s reasons for going to war in Iraq
Approximately three hundred years ago Mr. Jonathan Swift, when faced with a similar crisis in his own British Society, this one dealing with a famine in Ireland while in the midst of overpopulation and the existence of many underprivileged out and about in public view, offered a modest proposal for the benefit of the Greater Good. In that spirit I also am so inspired and have the following argument to present for your consideration. My intention shall not solely be addressed to remedy the pressing and immediate problem at hand but also to administering to the general good of our Society and the Republic. As to my own part, having turned my thoughts to this very important subject as my years have advanced and my maturity having blessed me with the objective wisdom of the illuminati, I make this humble proposal for the public consumption which should obviate any need for even the slightest objection.
First, how did we get into this problem? We are told by our leaders that this is a problem for the younger generation – that they will not be able to collect on the savings that they have and will be contributing to over many decades to come. Personally I am perplexed as to how it is that if someone has 12.4 percent taken out of their pay (half by them and half by their employer or the whole 12.4 percent if self-employed) and that this amount if surplus in the retirement account is to offset the Federal deficit so that the Federal Government does not have to go out in the financial markets and sell treasury bond obligations (currently at over a 4-½ percent interest rate) and that this goes on during the working life of someone which may be for as long as forty years or more and then when it comes time to collect and the payout is restricted to a monthly sum that yields only an annual return of less than two percent2 for most workers, that this arrangement with the public trust is going broke. How do we figure this?
Perhaps it is the chicanery of our elected representatives in the slight-of-hand shell game of managing the public trust by borrowing from one account to spend in another and forgetting to pay the first account when several decades go by. Or is it our collective inability to grasp mathematical concepts (mathematical concepts like present value, future value, and rates of return), a failure that has been rooted in our educational development since adolescence. Could that possibly account for the duplicitous relationship between us, the governed, who require our insatiable appetites for consumption over thrift to be satisfied, and our elected representatives who are forever ingratiating our conspicuous desires for their own longevity in public service? A very comforting, if not incestuous, relationship to say the least.
This is all to say that if there ever was a surplus in the retirement account it has long since been spent and in all likelihood the IOUs (i.e., non-negotiable treasury certificates) have long since been forgotten or critics of the system would like us to think of them as “worthless”. Was not our deposits into the Social Security Fund supposed to be in a lock box? Apparently someone has picked the lock. Quite a comment to make for a generation seeking security in the twilight of life while a younger generation is preaching personal responsibility by way of the Ownership Society. And what do our elders have to say about this? Were they not the ones who when younger said, “Don’t trust anyone over thirty.”? Well now it is forty years later.
So the question becomes what shall we do with this elderly generation which has placed a burden upon our Great Society by all accounts from their own poor foresight? I drew upon my reverence for historical texts and wisdom to inquire about the plight of our elders and the great strain that is placed upon our nation’s resources which may be better utilized for future growth, that I found solace in Mr. Swift’s article some three hundred years ago. As Mr. Swift found himself in a society blind to the less fortunate in his times, we find ourselves in a society with a voracious appetite for capacious consumption that has no bounds and knows no end in a global economy of so-called limited resources. It is with great reluctance that I would attempt to implement Mr. Swift’s plan of attack here; but, it is with the anticipated enlightenment of the consequences that I make the following case.
What do the elderly do? They populate the crowded golf courses and fishing holes and shopping centers and cause congestion in waiting lines while everyone else is in a rush contributing to the productive wealth of our Great Society. The elderly being primarily consumers, not producers, of our Society’s resources provide little or no benefit to our Society.
Now I live in the Southern California area and I can tell you that when this elder generation was younger they dismantled one of the best urban mass transit systems in the nation when they undid the trolley/train system in the LA metro area – a system even greater than that found in New York City – so that we could be blessed with a car culture. And now these same elders are screaming at the younger generation who want the elders to take another driver’s test in old age as a requirement for renewal of a driver’s license after a few of these elders have plowed into innocent people in clear driving situations. The elders have retorted that if they fail their driver’s exam there is no other transportation available to them. Hmmm!
And were not the elders one of the first in line when tax give-aways were being handed out from our supposed budget surplus. In the year 2001 the tax reductions totaled over $1 trillion (over an eleven year period from 2001 to 2011) 3 and came not from a surplus in the operational budget (which was in deficit) but from the surpluses in the Social Security contributions4. And who got most of that tax give-away from the Social Security contributions? People with incomes over $100,0005 – incomes over $90,000 are not subject to the Social Security Withholding Tax. And if you can excuse my impertinence I might remind you that the younger generation was in that same line with the elders.
With professtations for an Ownership Society the younger generation may declare an act of forbearance over their elders; thus, freeing themselves of the burden of others. This would also ease the Medi-Care burden, which I am told is even greater than that of Social Security. The Medi-Care burden has twice the indebtedness of Social Security, an unfunded liability of almost $28 trillion versus $11.5 trillion which is due next decade whereas Social Security is several decades away due in 20426, a circumstance that hardly gets a mention.
Now whereas the British Mr. Swift, after being assured by a knowledgeable American, that a young healthy child made a delicate treat whether “stewed, roasted, or boiled…served in a fricassee or ragout,” I wonder if we could not do something more or less the same with our elders. I would not be so crass as to offer them up for human consumption as I am well informed by the conosciuti that an old person would not be as delectable as a young child and in all likelihood would be unpalatable for the digestion like aged beef or week old fish. However, I think we can whet the appetite so to speak if we might consider what some might think is a dystopian plan for feeding our livestock, an issue which is gaining attention in another crisis mode by some in our society.
With the safety of our food supply coming into question with the outbreak and spread of bovine spongiform encephalopathy (BSE aka mad cow disease) due to the vicious cycle of same animal parts being fed back to similar animals, adding the elderly to the food chain of livestock would increase the diversification of the protein supply. [We are prohibited from feeding cattle to cattle, but can feed cattle parts to pigs, chicken, and fish. We cannot feed pigs to pigs or chickens to chickens, but can feed them to another species – pigs to chickens or cattle, or chickens to pigs or cattle. But eventually, one animal could get fed back to a similar species; and, thus the danger of BSE.] I propose we continue this cycle of madness by including our elderly in this food chain for further diversification. Why we may even be able to procure a good price for the carcass that an elder may fetch. This may be regarded as hardly a sacrifice but rather an emolumentary exercise and is much preferable to Mr. Swift’s solution of devouring our progeny for a prosperous future. While the present generation ingratiates itself with abundance by living in debt and passing that burden to future generations, metaphorically speaking by feeding off its young, I suppose that future generations may be righteously inclined to relieve that burden of its forebearers.
Getting rid of our elderly would help ease our Medi-Care burden. It would cut down the drug industry which has been overcharging anyway. We wouldn’t have to take bus trips to Canada which waste precious fuel and would also stop funding the Canadians which would ease our balance of payments which, need I remind you, is also in deficit. I don’t have the time or space to go off on the Canadians. Since they are only our neighbor, not citizens, commiserating for their regard is not of the immediate concern. Whereas this savings in societal costs for medical care for our elders may be passed on to those younger who are truly in need due to infirmities and disease or perhaps we may include them also in the food chain for livestock for even a greater savings to our great Commonwealth.
Other benefits would accrue. This would ease areas of our country that are over-populated with a higher concentration of retirees, usually looking for bargains from states and municipalities that ease the tax burden on such. Whereas the depopulation of the elderly will make more room for newly arriving immigrants who may have bypassed appropriate measures for registration but are usually younger and thus producers and tax payers in our country thus relieving this burden somewhat. And because they are of an illegal status but pay into Social Security with phony Social Security cards, Social Security taxes that they never collect on, we have a further benefit to our problem. The Social Security Administration usually adjusts/reduces the Social Security accounts that have benefited from these illegal contributions. I suppose this means we have another source of excess contributions to the Social Security System.
Of course we could remedy this Social Security Problem by changing it from a pay-as-you-go to a pay-for-your-own system and making participation in the system directly tied to future improvement in our economic enterprise by way of capital investment and improvement of our citizenry responsibilities by way of educational development. Your contributions to your Social Security account would be handled by a commission similar to the federal employees Thrift Savings Plan whereby contributions would be invested in something like a fund of 60 percent stocks and 40 percent bonds, which have typically yielded eight percent per annum. Your payback on retirement could be an annual yield of approximately seven percent (nominal rate, i.e. allowing for inflation, so the real rate (not including inflation) would be approximately four percent) and so the Federal Government would still have a profit on the spread to continue financing its own operations as it does today. If you continued the current 12.4 percent contribution tax rate, the maximum monthly payment might be something like $3,000 per month for the average worker instead of the less than $2,000 per month they currently max out on. But since the 12.4 percent tax is considered by some as an onerous payroll tax and gets a lot of complaints from employees looking at their pay stubs and noticing that the Social Security withholding tax is usually the highest item for deductions, and also employers who are paying half of that 12.4 percent; maybe we could cut the withholding tax in half and keep the seven percent return but just reduce the maximum monthly payments to around the $2,000 per month figure. Either way the monthly sum could be paid with cost-of-living increases each year in perpetuity. And I don’t want to even bother to go into the subject of what happened to all of the money which was paid into the Social Security account over all these decades and the people who may have passed on to a better place before they could collect in the here and now or for the people who finally died and their money remained in the account rather than being passed to their heirs. Is that too much math for one bite?
And to keep the Ownership Society going strong, why don’t we do more to encourage contributions to IRAs (Individual Retirement Accounts) and 401ks instead of trying to encourage private (or personal) accounts in Social Security? We may think that it is our God given right to be rich and so dump it in the stock market for thirty years and see what you get; but, the market goes up and the market goes down. We are all financial wizards when the market is going up; but, when the market takes a tumble we are all looking for someone to hang. And how many among us has the financial acumen to be appointed to the board of directors of a failing oil company – right after our own company failed and never made a profit – and be given company stock and secure personal loans and know to sell out at a high price (obtaining over $1 million) just before the company goes under?
There are those who would fix the Social Security Problem by taxing the wealthy and then means testing them before paying them in retirement; but, they paid their own money into it just like the working class folks. It’s their money, not the taxpayers. Just like it is your money that sits in your account and not the taxpayers. Just because the Federal Government sits as a custodian on the money for decades and uses it to offset the operational budget deficit, does not mean when you finally get paid in retirement that it came from taxpayers.
This modest proposal is humbly submitted for consideration with the hope that if found acceptable execution of that herewithin will take place with the mercy of our youngers and hopefully with the exclusion of present company for originality, if I may be the first to petition as such. I suppose, perhaps, that we could keep a few of the old folks on-board as a way of preserving continuity; maybe, by way of awarding the Blue Ribbon for life’s accomplishments. It is only with the utmost of pleasure that I endeavor to preserve the well-being of the well-off and responsibly independent and thus continue the noble experiment in self governance and self improvement as an exemplary example for others in our Global Village.
Sarcasm aside, this is not a system that is going broke or in “crisis”. It is only up against a demographic shift in the population and our own unwillingness to deal with the increases caused by our “entitlement syndrome” for both individuals and businesses and anyone else in the world who can find cause. This demographic bubble will work its way through till the shift comes back into balance and ends up with another shift toward a younger generation. And if you are in wonder if our society can support the bulge in the dependent baby boom generation when they retire? Well their parents sure did in the 1950's and 1960's when the dependent baby boom generation was younger and not wage earners. The question then would be will the government cut payroll taxes to meet the new trend? The shortfall we have now can be made up by increasing taxes (raise the $90,000 limit to $120,000 or $150,000) or a variety of other measures even to include borrowing and adding to the national debt. The Social Security contributions have generated trillions of dollars in surplus in the past, all spent to offset operational budget deficits or payoff the deficit in the few years when the unified budget was in surplus. When we had Social Security deficits in the past they were all made up by increasing taxes and making other adjustments to the system. The deficits were erased by cashing in the so-called "worthless" non-negotiable bond certificates. Social Security is expected to generate at least $6.6 trillion in surpluses through the next decade when it is projected to go into deficit again7. I find it interesting that so many in our society have the ability to project seventy-five years into the future with impeccable precision when we have so much difficulty dealing with the hear-and-now. But perhaps it has always been easier and more convenient to deal with the future rather than face present day circumstances.
As elders we find ourselves smitten by a young generation that proclaim the virtues of thrift, frugality, and personal responsibility as if it were their manifest destiny to be financially independent. Never mind that you were made to work and will probably work till you drop dead. That’s why the Good Lord gave you two arms and two legs and a brain. “Retirement”???...”Leisure”???...merely another concept devised by twentieth century marketers for whatever purpose. The true test here is one in the noble experiment of self-governance and whether any of us has the capacity and willingness to engage the process. Should we continue with a representative democracy and the duplicitous relationship between us, the governed, and our elected representatives; or, in the newly emerging information age, can we find the time to spare in our preoccupation with leisure and 24/7 work habits and spend more of it with direct participation in the process? The test for any form of governance is the discipline required to keep one’s hands out of the communal pot of gold for personal gain, whether it be in the hallowed halls of government dispensing the public trust or in the gilded corporate suites providing for societal needs. Human kind values and praises individuality, but out of necessity we find comfort (i.e., security) in associating with others.
© Copyright/Victor Volpe/2005/All rights reserved.
SOURCES
1 I have cited sixty-five years (since 1940) of existence starting with the issuance of the first recurring monthly Social Security payment rather than the implementation of the program in 1935. Miss Ida May Fuller of Vermont was the first to receive a monthly check, issued January 31, 1940 for $22.54 when she was sixty-five years of age and continued receiving checks until 1975 when she passed at the age of one-hundred while living with her niece, never having married and without any children for support.
Reference: www.socialsecurity.gov/history/imf.html.
2 Federal Reserve Bank of San Francisco (FRBSF) Economic Letter 99-34, ‘Rates Of Return From Social Security’, November 12, 1999. The article cites that only the bottom 20 percent of the income distribution can expect returns greater than two percent. The remaining 80 percent of the distribution, composed of middle and upper income workers, can expect real rates of return below two percent and even below one percent for upper income workers. [page 2] www.frbsf.org/econrsrch/wklyltr/wklyltr99/el99-34.html.
3 The actual figure cited is $1.35 trillion. Transcript of news release from PBS NewsHour, ‘President Bush Signs Tax Cut’, June 7, 2001 . www.pbs.org/newshour/updates/june01/tax_6-7.html.
4 I have only cited a couple of sources here; but, at the time this was widely mentioned in the print press and radio and television broadcasts. You should note in reading (or listening) to the Bush Administration advocates spinning the positives of the tax cut that these conversations took place just before the tragic events of 9-11, where upon followed a modest recession that decreased government revenues and a military build-up which increased government spending resulting in operational budget deficits which we have not seen the end of yet. Transcript from PBS NewsHour, ‘Shrinking Surplus’, August 21, 2001 . www.pbs.org/newshour/bb/economy/july-dec01/surplus_8-21.html. In this conversation Rep. John Spratt, the senior Democrat on the House Budget Committee, mentions the operational budget surpluses/deficits and the effect of Social Security surpluses in the trust fund. Transcript from PBS NewsHour, ‘Dwindling Dollars’, August 28, 2001 . www.pbs.org/newshour/bb/budget/july-dec01/dollars_8-28.html. In this conversation Alice Rivlin, former Director of the Congressional Budget Office and former member of the Federal Reserve Board, also mentions the surpluses in the Social Security trust fund.
5 I have cited several sources here because this point gets obfuscated in the discussion between Bush Administration advocates of the tax cut and critics of the tax cut. The advocates will discuss the tax rebates handed out during 2001 as being distributed primarily to lower income people while the critics will point to this amount being only a small portion of the $1.35 trillion to be distributed over the eleven year period as a result of tax bracket reductions and other tax reforms like the repeal of the inheritance tax and corporate tax breaks distributed to individuals (e.g., dividends, etc.), and other items. A good look at the sources will reveal that incomes over $147,000 (the top five percent of income groups) will get over 47 percent of the $1.35 trillion. During the first Gore-Bush Debate in 2000, then candidate Bush wanted to pass the surplus in the budget back to the people saying, “…why don’t we pass $1.3 trillion of that back to the people who pay the bills? …I think it’s the hard-working people of America July 27, 2001 . www.pbs.org/newshour/bb/economy/july-dec01/booster_7-27.html. See comments by Eileen Appelbaum, research director of the Economic Policy Institute. Transcript from PBS NewsHour, ‘Feeling The Tax Cut’, May 28, 2001. www.pbs.org/newshour/bb/economy/jan-june01/taxcutfx_05-28.html. See comments by Senator Kent Conrad, “The top 20% get 71% of the benefits.” Policy Brief # 101-2002, ‘The Bush Tax Cut: One Year Later’, by William G. Gale and Samara R. Potter, The Brookings Institution, 2002. www.brookings.edu/printme.wbs?page=/comm/policybriefs/pb101.htm. [see chart page 2] Debate Transcript ‘The First Gore-Bush Presidential Debate’, Commission On Presidential Debates, October 3, 2000 . www.debates.org/pages/trans2000a_p.html.
6 Issue Brief No. 278, ‘Controlling Health Costs And Improving Health Care Quality For Retirees’, by Jim Jaffe and Paul Fronstin, Employee Benefit Research Institute (EBRI), February 2005. www.ebri.org. Policy Brief # 126, ‘Reforming Social Security: A Balanced Plan’, by Peter A. Diamond and Peter R. Orszag, The Brookings Institution, December 2003. www.brookings.edu/comm/policybriefs/pb126.htm. [page 3] CRS Issue Brief for Congress, ‘Social Security Reform’, by Dawn Nuschler, Congressional Research Service (The Library of Congress), March 3, 2005 . [Summary paragraph and page 2] www.ncseonline.org/nle/crsreports/economics/econ-100.cfm?&CFID=493675&CFTOKEN=65603432 [This is the basic report. The March 3, 2005 update to the basic report was not on the web site at the time of this writing.]
7 CRS Issue Brief for Congress, ‘Social Security Reform’, by Dawn Nuschler, Congressional Research Service (The Library of Congress), March 3, 2005 . [page 2] www.ncseonline.org/nle/crsreports/economics/econ-100.cfm?&CFID=493675&CFTOKEN=65603432 [This is the basic report. The March 3, 2005 update to the basic report was not on the web site at the time of this writing.]
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