Very few senior citizens have heard of Ephram Nestor. And not
many junior citizens, either. Nestor was a Bulgarian who came to
America in 1913 and lived here continuously for 43 years. Then, in
July 1956, he was deported for having been a Communist from 1933 to
1939, a period of time during which membership in the Communist
Party as such was not illegal and wasn’t even a statutory ground
for deportation.
For nineteen years, Nestor and his employers had made
regular payments into the Social Security system. In 1955 he became
eligible for payments from Social Security. When he was deported,
the government cut off his payments. Nestor sued.
Nestor lost. The case, Flemming v.
Nestor (Flemming was the secretary of Health, Education,
and Welfare), established the principle that entitlement to Social
Security benefits is not a contractual right.
Seniors today worry about that principle even though they
have never heard of Ephram Nestor. They are right to worry, and all
the more so when they read statements like the following one from
Washington Post columnist Robert J. Samuelson.
He described as “highly misinformed” Americans, which
includes the elderly, who believe that the elderly have “earned”
their Social Security through their lifelong payroll taxes. Both
Social Security and Medicare, Samuelson writes, “are pay-as-you-go.
Today’s taxes pay today’s benefits; little is ‘saved.’ Even if all
were saved, most retirees receive benefits that far exceed their
payroll taxes.”
Of course they do! What should they expect? Only to get
the same number of dollars back, without any return on the funds
and without any compensation for inflation?
Proponents of changes to the Social Security program will
not win the support of seniors, or juniors, by making that
argument.
People who have paid, for decades, into a retirement
system are entitled to think they are entitled to get their money
back with decades’ worth of interest.
The point Samuelson ignores is that if people had not been
required to pay into the Social Security system, they could have
put that money in the stock market instead. In which case, their
retirement payments would not only be more secure but also larger
than the payments they will get from the current Social Security
system.
Reformers — in the nature of things, that means
Republicans — must make a different proposal, one that addresses
the concerns of future recipients, who believe, correctly, that
their benefits under the current system are no more secure than
Ephram Nestor’s were.
The only sensible proposal will include allowing workers
to save some of their retirement funds in personal accounts that
they can invest, in some sort of fund, in the stock market. That
obvious concept has been demonized by liberals with the word
“privatization,” privatization being to liberals what garlic is to
Dracula.
Rep. Anthony Weiner (D-NY) mocks the concept of allowing
workers to invest in the stock market: “Boy, that’s seems smart,
huh? Investing Social Security in the stock market.” “Boy, talk
about lessons unlearned.”
President Obama also dissed the stock market in his State
of the Union speech: “We must [solve the Social Security problem]…
without subjecting Americans’ guaranteed retirement income to the
whims of the stock market.”
Democrats love to dump demagogically on the stock market
when it takes a tumble. Today, however, the market is making a
magnificent comeback. But the key point is that one year — one
decade even — does not a retirement fund make.
A few years ago, the Congressional Research Service
studied 35 different 41-year time periods and determined that there
was not a single period in which a worker would not have been
better off investing his payroll taxes in stocks than remaining in
the Social Security system. Boy, doesn’t that make investing your
retirement fund in the market sound like a good idea, huh? Who’s
unlearned now?
The president said in his State of the Union speech that
“the state of our union is strong.” Though not strong enough,
apparently, for Americans to invest in.
But Chile is strong enough for Chileans to invest in.
Chile privatized its retirement system in 1981. Workers are
required to invest at least 10 percent of their salary in a
personal retirement account, but they can invest more, and they can
determine when they retire — whether it be age 45, age 65, or age
85. The poor and people unable to work can still be covered by a
government plan.
If Chileans can have private plans, why can’t
Americans?
Because the liberals won’t let them. And unless the
Republicans can learn how to teach Americans about personal
retirement accounts, Americans will be doomed to the clunky Model T
retirement system designed by Franklin Roosevelt and preserved by
generations of big-government liberals.
Small-government Republicans will have a receptive
audience. A Pew Research poll taken last September found that 58
percent of the public favors allowing workers younger than age 55
to invest part of their Social Security taxes in personal
retirement accounts. Seventy percent of those younger than
age 30 favor personal accounts, while — pay close attention,
please — 66 percent of those under age 30 voted for Barack Obama.
Wow! That’s called an opportunity.
If Republicans lack the imagination to seize that
opportunity, they deserve to be haunted for life by the ghost of an
ex—Social Security recipient, a poor, unfortunate, ex-Communist
Bulgarian immigrant named Ephram Nestor.
