A Siren Song: How Insolvency Threatens Social Security
The so called third rail of entitlements threatens to derail the entire Federal government. Popular or not, we must take action.
Throughout the annals of fiscal policy, few programs enjoy such equal amounts of praise and criticism as Social Security. For almost one hundred years, it has served as a safety net for countless retirees, offering financial stability as they approach the twilight of their lives. Now, the perilous state of Social Security's solvency demands an impartial examination of our nation's most trusted safety net.
As it stands, Social Security is a siren song, luring Americans into a false sense of safety with empty promises. American workers have been lauded with promises of comfortable retirement, yet the program will be unable to deliver. Unless major reforms are enacted, it will go bankrupt within the next decade. Most people my age realize that we will receive, at best, ‘a birthday card’, and most likely, nothing from the Social Security system. This impending predicament does nothing to quell the already widening gap of intergenerational equity.
Yet no one wants to come up with a solution.
The libertarian claim that the program should be discarded all together is preposterous, heartless, and improbable. Donald Trump, the de-facto leader of the Republican Party, vows he won’t touch “your Social Security and Medicare.” Of course, Mr. Trump showed no concern spending money the country simply did not have. The Democrats are arguably the worst offenders, the modern liberal groupmind seems to live in a state of ridiculous delusion that the program will simply be fine if left alone.
George W. Bush attempted to address the insolvency ages ago, but cowardly ‘do nothing’ Republicans and Democrats failed to risk their reelection prospects by touching what is a ticking time bomb. The seeds of compromise and bipartisanship, necessary for an undertaking such as this, failed to take root. The longer reform is delayed, the more painful and malicious the side effects will be.
In 1950, there were 16 workers contributing to the fund for every retiree who was taking out. Today, the ratio has dramatically dwindled to two workers per beneficiary. As the baby boomer generation, who are already living longer than any prior, continue to retire, the strain on an already dwindling Social Security grows unsustainable.
The average American pays roughly $280,000 into the Social Security fund, assuming an average income of $55,000 and a career of forty years. If a worker had been allowed to invest the money instead, that $280,000 investment with a 5% annual return would grow to approximately $1,018,416 over 40 years. Instead, the average benefit will be $1,827 per month — $21,924 a year.
This is why voluntary personal accounts are an approach that merits serious consideration. These accounts would in theory allow individuals to invest their earnings in a conservative mix of bond and stock funds, which grant a higher rate of return than the current system. Having a million dollars of returns to draw from seems better than the limited $21,924 a year.
Many on the left propose an increase in payroll taxes, which would only perpetuate the problems in the current system, burdening future generations with the same instability. The retirement age should be drastically raised for younger workers, to reflect the changing demographics and increasing life expectancies. This would mirror the approach that previous generations took when the program was first established.
Nothing should be touched for the older generations, who approach retirement. They earned their share. It would be unfair to raise the age for those who have already given up so much.
A bipartisan commission, of the brightest economic minds in the United States, should be formed to save the program. History has shown that reforms and adaptations are crucial to the longevity of any system. Various ideas have been touted, indexing benefits to prices rather than wages, an increase in the age, or all out altering the benefit formula to discourage early retirement. Genuinely, all options warrant at minimum thoughtful deliberation.
Moreover, it is critical to refocus Social Security on its core mission, which is to provide for retirees, not to serve as another extension of the welfare state. Obviously the physically handicapped, veterans with PTSD, and other genuine cases should have the government step in somewhat. But those who cannot work due to factors such as anxiety, obesity, eating disorders, and other various conditions should not be subsidized by the program.
The program's resources have been stretched too thin, and too many 'looters' have sought to exploit the productivity of America's hardest workers. I would much rather have my payroll taxes cover the retirement of someone who worked forty years, than someone who hasn’t put a dime into the system. The inclusion of recipients who contribute nothing exacerbates the fiscal challenge and raises genuine concerns about the responsibility of people in our country.
Having compassion for those facing hardship is who we are as a nation, but we should recognize the value of personal responsibility that goes hand in hand with our founding concepts — particularly individual liberty. Should those who have not invested anything in the system receive the same benefits as those who have dutifully have? I think that is unfair.
Inaction in the face of the impending crisis highlights Congress' dereliction of duty. To do nothing is offensive to the hard-working retirees who have worked their entire lives to retire in dignity. Voluntary personal accounts offer a path forward, enabling individuals to secure their financial futures while relieving the burden on an overextended system. This decade will prove crucial. The time for action is now, before the looming storm of insolvency engulfs us all.