Robert Samuelson in today’s WaPo argues that Social Security more closely resembles welfare than a pension plan because (a) our money is not kept in retirement accounts but used to pay current benefits and (b) Congress can (and does, and will) change benefits independently of what we’ve each paid in taxes. Since it comprises such a large % of the budget there is no way we can fix our fiscal mess without reforming it, sooner rather than later and in ways in which the poorer recipients are spared.
In 2008, a quarter of families headed by someone 65 or older had incomes exceeding $75,000. No doubt people would be outraged. Having been misled, they’d feel cheated. They paid their taxes, why can’t they get all their promised benefits? But the alternative is much worse: imposing all the burdens on younger taxpayers and cuts in other government programs. Shared sacrifice is meaningless if it excludes older Americans.
The “fix” for Social Security could actually be relatively easy and painless thanks to the magic of compounding: (a) gradually nudge up the retirement age to reflect longer life spans and (b) index benefits to inflation rather than wage growth. That’d get us 2/3 to 3/4 the way home. The last piece would have to involve some form of means-testing for the wealthy (Samuelson’s point above). The alternative is to tax my kids to pay for a portion of Bill Gates’s retirement.
The trouble, of course, is political: once we explicitly acknowledge the reality that it’s not a pension plan, that there is no account with your name on it earning interest, that some of what gets paid in gets paid out to people who never paid in and everything we’ve paid has already been spent… that’s going to upset some voters who have been misled for years.
But, not to worry. It won’t bankrupt us. Obamacare will.
Living longer + expensive technological advances + the notion “the govt” must provide free or subsidized health care to all = infinite demand + limited supply = disaster.
With supplies inadequate to meet increased demand, we’ll get lines + rationing + denied end-of-life care = generally crappy health care for all. Except for Warren Buffet, whose Viagra and Lipitor will be paid for by my kids.