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January 03, 2005

Social Security: No Crisis

This is a first in a series discussing social security

The biggest trap for progressives in challenging Bush on Social Security is buying into the idea that social security is a personal savings account or that there is a crisis at all. It's not.

From its inception, social security has been a system of SOCIAL spending by present-day workers to take care of present-day retirees and the disabled. As people had fewer and fewer kids or no kids at all, it was no longer viable to pretend that retirees could depend on their own children for retirement income. Instead, starting with the Great Depression, we came to expect that workers collectively would pay for the retirement of all seniors.

And despite all the talk of "crisis", it's perfectly reasonable to expect future workers to fully take care of future retirees. To imagine otherwise is to envision a collapsing future economy where the economy is not self-sustaining, where citizens collectively consume more than they can produce, and where they depend on money shipped from the past to the future.

Why There is No Crisis:

According to the Social Security Trustees (whose projections fuel all this public discussion of "crisis"), workers in the future are going to be far richer than today's workers, and retirees will be receiving far higher benefits. See the graph and chart below for annual benefit and wages in 2004, in 2042, when the trust funds are projected to be exhausted, and in 2080, when the much-discussed 75-year projection ends:

SS projections.JPG

* In 2004 dollars, see here for details
** In 2004 dollars, see here for details

Why the hell are we worrying about solving the "problem" of workers in the future who will be making far more than workers today?

Even if we talk about the official actuarial assumptions, the report by the Social Security system's Trustees estimates that the total unfunded liability of Social Security for the next 75 years is $3.7 trillion. That's not a tiny amount of money but it's less than projected deficits under Bush policies for just the next ten years. Given the wealth of the future, it's hardly a crisis to let them deal with these costs in the future.

When you get to the bottom-line, "fixing" social security involves a few simple options:
(1) Cut benefits in the future
(2) Raise taxes in the future
(3) Save money now in some form and bail out the future

Now, why would we be asking taxpayers TODAY making an average of $35,000 per year to bail out taxpayers projected to be making so much more in 2042 and 2080?

Remember even if benefits in the future are slashed 20%, those retirees will still be receiving more benefits than today's retirees.

Or even if an average worker in the future had to pay an additional 10% of their income to cover retiree benefits, they will still be making more after taxes than today's average worker.

Look again at the graph above and repeat this mantra to the crisis mongers: Workers making an average of over $80,000 per year in 2080 do not need help from taxpayers today.

There is no social security crisis, period.

Posted by Nathan at January 3, 2005 02:50 AM