Social Security reform: Just the tip of iceberg
Back in 1935, when male workers only lived to about age 55, President Franklin D. Roosevelt conceived the Social Security System. The catch was you had to reach age 65 to collect your “retirement.” Both then and now, Social Security is a system that transfers some of the income of working Americans to those who have left the workforce for retirement.
Back when the ratio of active workers paying into the Social Security Trust Fund to retired workers drawing Social Security was 16:1, the burden was light. But because so many Americans live to reach Social Security retirement age and increasingly far beyond, and because so many more Americans are leaving the workforce for retirement, the worker to retiree ratio is now 3:1. And, inevitably, 2:1.
By 2018, the amount being paid out by Social Security will exceed the amount it takes in. Unless something is done, by the year 2042, it will not be able to meet its obligations. Call it what you like, but the workers eligible for Social Security retirement in 2042 will have all kinds of nasty names for a return of 70 cents or less on their Social Security contribution dollars.
President Bush has laid down four markers for Social Security reform: One, the benefits for those currently age 55 or older are not to be changed in any way. That takes those workers and the Democrat-controlled American Association of Retired Person (AARP) off the playing field. Two, he will veto any attempt to raise Social Security taxes. Three, the Congress can consider the painful choices of raising the retirement age and/or reducing Social Security benefits.
Or, four: President Bush offers Congress the relatively painless alternative of allowing younger workers to invest up to four percent to their social security taxes into a Private Investment Account which the worker would own but would be required to hold onto until retirement. Federal workers have had a similar plan for years. Ask a federal retiree how he or she likes it.
If you are age 55 or younger, plug your age into one of those free calculators found on the Internet and it will figure out how much your Private Investment Account will be worth when you reach Social Security retirement age. And, it will compare that sum to what you can expect to receive in Social Security payments. Even using the very conservative investment strategy envisioned by President Bush, you will see your Private Investment Plan will be worth twice as much or more than your Social Security benefits.
So, why won’t the Democrats go for the Bush Plan? Two reasons: As the years go on and workers see that their Private Investment Accounts are so much more valuable than what they get back for all their Social Security contributions, they might call for an end to the Democrat’s pet program of the 20th Century. It simply will not do for a Republican President to get credit for fixing or improving the program Democrats invented.
But the main reason the Congressional Democrats will oppose Private Investment Accounts was revealed by the late, Democrat U.S. Senator Daniel Patrick Moynihan. Senator Moynihan was asked why Democrats would not consider Social Security reforms that would guarantee wealth as well as income? Senator Moynihan said, “It’s because Democrats worry that wealth will turn Democrats into Republicans.”
Finally, here’s the biggest reason to fix Social Security: The life expectancy “problem” is much greater that we realize. Read The Baby Boomer’s Guide to Living Forever by Terry Grossman, M.D., and/or Fantastic Voyage: Live Long Enough to Live Forever by Ray Kurzweil and Dr. Grossman and you begin to see that the generation following the Baby Boomers may routinely achieve longevities in the range of 100 to 150 years. Indeed, there is a chance that those college age and younger could live forever. If Dr. Grossman and Mr. Kurzweil are correct, we need to rethink a lot more than just Social Security.
William Hamilton, a syndicated columnist, a featured commentator for USA Today and self-described “recovering lawyer and philosopher,” is the co-author of The Grand Conspiracy and The Panama Conspiracy – two thrillers about terrorism directed against the United States.
©2005. William Hamilton.