Economics Without The B.S.**: Fixing Social Security
[** Double entendre intended.]
Fixing Social Security
In response to Star Parker's recent column on fixing Social Security:
The present Social
Security Program, if fixed with the modifications that have been historically
made, is sustainable over the long-term, economically sound, and socially
responsible – so say the actuaries (namely Stephen Goss) who work on the
program and are responsible for providing guidance for the sound upkeep of the
program.
Star Parker’s
recommendation to fix Social Security was to turn it into a retirement savings
program; but, Social Security was designed from its start over seventy years
ago as a social insurance program to primarily benefit low-to-middle-income
Americans. Her 30/30 Plan is inadequate
to address the realities of someone who earns $30,000 or less. To talk about savings at this income level is
a non sequitur, often they are in a negative net worth status and so they are
unable to build any kind of real savings.
Social Security addresses this by being a forced savings program, not
voluntary; and, by being a guaranteed benefit, not one that is subject to the
risks of the marketplace borne by the individual participant.
She talks about
building on the first principles of our free society but ignores one of the
basic ones, promoting the general welfare, which Social Security does by being
redistributive in nature and progressive in dispensing benefits to the lower
incomes in our society – the sine qua non of social insurance.
She talks about an
ownership society and implies that Social Security is part of our welfare state,
not recognizing that we all pay into Social Security and that it is not
financed by tax payer dollars from the General Fund but from the Social
Security Trust Fund, currently with a $2.7 trillion surplus, that we (and our
employers on our behalf) paid into. We
earned it; and, that is why it is an entitlement program – not welfare.
The Social Security Program
is not hopelessly broken. Mr. Goss, the
Chief Actuary, has plenty of statistical studies to show that the type of
modifications that were made in the past – raising the income cap, raising the
payroll tax, adjusting the retirement age, re-computing the benefit formula,
etc. – and were gradually phased in so as not to shock people can restore the
system as is to long-term sustainability.
The biggest obstacle to this has been political inaction because
politicians would be labeled as tax increasers.
But President Reagan was able to gather a bi-partisan group to fix
Social Security the last time it faced a similar crisis in 1983. Is there any politician who expects to get
re-elected after telling Granny that she is only going to get 75 cents on the
dollar for benefits?
We live in a democratic
system. It is up to each generation that
participates in the Social Security System to either renew that support or find
a different approach. Political will is
not just a test for politicians, but also a test for the people they serve.
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