Another Perspective

Private Concern

For young people participation in Social Security is nothing more than a grand giveaway on their part. How long before they opt out entirely?

By 3.8.04

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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.

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