The Senate Democratic leadership is using an Internet petition to send
a message to President Bush: preserve the current Social Security
system. But given that younger people most often use the Internet,
and that younger workers stand to lose the most by defending the
status quo, perhaps this particular delivery system was a bit of an
incongruous choice.
“The Social Security Trust Fund is not in crisis; it currently
is projected to remain solvent until 2042,” says the petition.
Well, Senators, in 2042 I’ll be 63 years old and looking forward to
my retirement. What is your plan for my retirement?
I know it’s crass to inject my own personal interests into a
policy discussion, to ask, “What about me?” There are many groups
of other people, we’re reminded, who should come first. The
children, for example — the elderly, the poor, the Iraqis. Nobody
will ever say, “Eat all your peas, Timmy. After all, there are
twentysomethings out there barely making the rent.” When it comes
to Social Security and youngish adults, we’re on our own. “What
about me?” is exactly the question people my age should be
asking.
WHEN SOCIAL SECURITY WAS ENACTED, there were significantly more
people working than there were retirees getting benefits. Life
expectancy was shorter too, which meant that retirees weren’t
getting benefits into their 80s and 90s. According to the 2003
Social Security Trustees Report, there were 16 workers paying for
the benefits of one retiree in 1950.
But as the enormous baby boomer generation begins to retire in
2008 and life expectancies rise, there will be fewer and fewer
workers — young workers, it bears repeating — paying for retiree
benefits, and a massive bill to be paid. By 2020, it is projected
that only two workers will be bearing the financial burden of each
retiree.
So, twentysomethings continue to pay into the system even as we
save independently for our own retirements, knowing full well that
the money we put in now will be long gone by the time we’re ready
to retire, with no one around to pay for us. “Social Security has
grown to become an essential facet of American life,” say the
Democratic Senators. They say that like it’s a good thing.
THE COLD FACT IS, workers in their twenties are effectively
giving away our Social Security contributions. We are at
the bottom of the Ponzi-scheme, with no one left to hoodwink into
the deal. And like Charles Ponzi, the poor fellow, the United
States government forgot the first rule of swindling. Don’t stick
around making more and more promises; take the money and run.
And how do policymakers want to fix the system? The best plan
for young workers would be a system of private accounts. The Cato
Institute, for instance, has unveiled the “6.2 percent solution,”
which would allow young workers to invest half of our payroll taxes
(6.2 percent of our income) into privately managed retirement
accounts, similar to IRAs. The other half — the half that
employers pay — would go towards the transitional costs of paying
the traditional Social Security benefits for those who have already
retired and those nearing retirement.
Though there will be substantial costs up front to transition
the ailing system to private accounts, it’s important for those
turned off by the prospect of greater deficits to understand that
reforms don’t generate new deficits, but simply pay for future
deficits earlier. The savings will run to several trillion
dollars.
The other two options for reform are cutting benefits and
raising taxes. Neither one should be very attractive to my cohort
because neither solves the problem of the imbalance of retirees to
workers. And neither reducing outlays nor increasing revenue holds
the promise of the high returns possible with private investment.
With reduced benefits and higher taxes, we will simply pay more now
to get less later, and put off fixing a problem that we could be
remedying today. It would certainly be a shame if we passed on the
mess we’ve inherited from our parents to our own children.
LAWMAKERS CONTINUE TO INSIST that they won’t break the promises
made to retirees and those nearing retirement. “Breaking our
promise to America’s seniors,” as the petition puts it, is not an
option. Benefits won’t be cut; privatization is out of the
question.
But every dollar of my payroll tax is a promise to me,
and that adds up to a couple hundred thousand promises that no one
really seems to mind breaking. Their mouths are writing checks that
the trust fund won’t cash.
