Time and money in Social Security
One of the things that annoys me about many of our congressional representatives, and they can be a particularly annoying breed, is their attitude about reforming the Social Security system so that it will remain a viable part of our social safety net.
Let someone suggest changes to the system, as did President George W. Bush, after his re-election in 2004, and they head for shelter. Social Security is called the third rail in American politics for a very good reason; politicians calling for change to it will be zapped out of office by an electorate they have kept in the dark about the systems plight.
Experts in the field have repeatedly told politicians and the American public that without changes the current system will become unviable sometime before mid-century. Sadly most of the political class appear to have no desire to suggest serious changes for fear of rocking the Social Security boat and end up having to look for a new job.
In the past when changes were suggested, Democrats in particular, spent a lot of time painting word pictures of senior citizens reduced to eating dog food to ward off starvation or wandering the streets. Let’s be honest; most Republicans weren’t much better at facing up to Social Security reform.
What are the cold hard facts about Social Security? In 1940 when the first Social Security benefits were paid there were 159.4 workers supporting each Social Security beneficiary. By 1970 this figure had decreased to 3.7 workers per beneficiary. By 2010, with baby boomers retiring in increasing numbers this figure had decreased to 2.7 workers per beneficiary and it is projected to fall to 2.2 workers in 2030.
Now combine this fact with the reality of a birth rate that has declined by nearly one-half from its peak of 63.2 live births per 1,000 women of child bearing age in 1957 and you have a situation whereby a declining worker base will be faced with supporting a steadily increasing beneficiary population. This is a recipe for disaster.
What can be done to save Social Security? It has been suggested that changes might include increasing the Social Security tax, removing or increasing the cap on the amount of income subject to Social Security taxes, reducing benefits for future beneficiaries, instituting some form of means test to determine benefits or even, heaven forbid, some form of privatization
Any or all of the above suggested solutions might help the save Social Security but the one that has always intrigued me is some form of privatization. Prior to retirement I used to wince at the amount of income withheld from my check for Social Security and think that if I could have invested some of it I could be a rich man.
Now before you decide to stone me I want to make plain that this would not mean turning the entire system over to private investment firms. What some have envisioned is a program modeled on the Thrift Savings Plan available to federal employees as a way to supplement a pension. I participated in this program for a number of years and was pleased with the results. This is a plan where a number of investment funds are made available that allow for diversification of investment and enable the employee to determine how much risk they are willing to take. The actual investing is done by the private sector under government oversight.
Why not try something like this as a solution to the Social Security crisis? Why not allow taxpayers to invest up to a certain amount of their Social Security taxes in investment accounts with the rest going to the Social Security Trust Fund. This might be riskier than regular Social Security but if history is any indicator the returns on investment in such a plan may very well insure a more comfortable retirement than just Social Security.
Privatization is an idea I happen to favor but as I have indicated there are other paths to reforming the system. But we have to do something soon or Social Security could become unsalvageable. We can’t wait for politicians to lead us out of the mess because almost by definition they lack the will and their record over the last 50 years bears that fact out. In the end it will be up to us. We owe that much to our children and others who will come after us.
Tom Kirkpatrick Sr. is a Silver Creek resident. Send comments to editorial@observertoday.com