27 February 2008|
Many less-political Americans, especially younger Americans, consider Social Security to be a boring, worthless issue that they don't need to care about. Here are eight reasons why that's wrong, and why everyone, especially the young, really should consider Social Security an important issue in their lives.
1. You're paying for it. 6.2% of every dollar you make is already going to Social Security, through taxes, whether you like it or not. That's four minutes of every hour working that you spend working for no one but Uncle Sam and your grandmother's bridge club. For someone who makes $40,000/yr, that's almost $2,500 paid over a full year. You're going to not care about something that you pay that much for?
2. You might not get anything for it. Despite your aforementioned investment, your future returns are looking less-than-stellar. The Social Security system is already facing a $26 trillion unfunded liability. That means they expect to need to pay that much more in benefits than they expect to get in tax contributions. (This is because the millions of retiring baby boomers collecting Social Security will greatly outnumber the younger workers who are left to pay for their benefits.) Either the $26 trillion comes (per usual) from our paychecks, or we are the ones who end up getting stuck with benefit cuts when we retire (see next point). Or, we could fix the system now. But that would first require actually caring about the issue.
3. You might need the money. I know we're all planning on being rich enough to not need Social Security, but hey, things happen. It's worth ensuring that the safety net will be there when we all retire. And many of the current "solutions" for the system include cutting benefits or making you work longer before you can collect benefits...all bad news for the future people who need the money.
4. You might even make some money. Personal account proposals leave the option for you to invest your retirement funds in stocks, bonds or other long-term investments. Seeing as the stock market has a average return of over 8% a year, and Social Security's current return is barely over 2%, Social Security reform could actually put you in a position to make some money. Who doesn't like that?
5. To hell with the old people, too. The senior citizens lobby, the one that just got us to pay $720 billion for a prescription drug benefit for old people only, is indeed running the political show for Social Security. They don't want to change the system. To that end, they throw their lobbying weight around making sure politicians don't do anything to fix anything too much. They can do this because they are large, but also because no one else challenges them. And if they have their way, the rest of us will get saddled with the $26 trillion. All the more reason to gear up and take them on, no?
6. America can lead the world (again). As bad as the Social Security situation is here, believe it or not, it's worse in Europe. Their benefits are plusher, so the costs of the system are higher. And their birthrate is even lower, so the impending baby boomer retiree money drain is going to be even bigger. If America can get its act together and solve this impending bankruptcy, we can (again) show the world how it's done.
7. You choose: collectivism or individualism? Many ideas for reforming the Social Security system, such as the private accounts that PI supports, change the nature of the system from collectivist to individualist. Currently, your mandatory tax contributions are lumped into a giant fund that is paying out benefits to retirees as you read this. This collectivist process is at the core of Social Security's financial crisis. Instead, you could control your own money. With the Social Security crisis, America faces the question of whether we should continue the socialist government policies of the 1930s, or whether we should give the power back to the people.
8. We have better things to do with $26 trillion. The sooner we find solutions for the Social Security crisis is the sooner all of that wasted money can be spent for something else. Everyone has ideas of where the government should spend its money, and even the bad ones are better what we're doing now - plugging a leak in a broken system with $26 trillion of political silly putty. Everyone should be able to agree on that.
The above work is the opinion of the author, and not necessarily that of the Prometheus Institute.