The Social Security reforms advocated by the Bush regime amount to a gigantic shell game. The program was designed to supplement people’s income when they retire.
The government knew it would be difficult for most Americans, whose incomes are limited, to save. Thus, they created a system to assist children whose parents died, citizens who became disabled and the elderly who have modest savings.
Social Security was designed to be a safety net.
What the Bush people want to accomplish is to change people’s behavior. This is kind of like forcing people to vote or give up smoking. It is not what government ought to do or, more importantly, what government does with much success.
Some people are savers; others use money for immediate gratification. Few are good investors. Most people have little patience and less education. It has been my experience that most elected officials are in this category.
Indeed, it is interesting to note that in Sweden, where the retirement system has included private accounts since 2000, the majority of Swedes made excessively risky investment choices by putting money into stocks at the market top.
The question that is mostly glossed over is, do we actually have a crisis in Social Security or is it a phony creation of the Bush neo-cons?
The government requires that the Social Security Administration project 75 years out. As a futurist, this is difficult to do with any accuracy. With demographics, there are wild cards – in the past this has included increased immigration, World War II (leading to the baby boom) and birth control pills, none of which were predicted.
Let us look at a few "assumptions." First, a 65-year old man today can expect to live to 82. By 2080, he could live to 86, according to the most likely projection. This assumes improvements in medicine and medical technology. This projection is optimistic. Indeed,
the Social Security Administration has been wrong for the past 20 years, as
the growth of
life expectancy
has slowed.
The Social Security Administration projects that immigration will taper off sharply from 1.2 million to 900,000 in 20 years. But won’t we need more workers as our birthrate declines?
And this immigration is legal, not illegal immigration, which is a reality in our society.
The Social Security Administration projects real wages to rise 1.1 percent per year. This is what it has done for the last 40 years. But as business finds it harder to hire people (because of lower immigration and a smaller pool of workers), wouldn’t wages go up more? Higher wages benefit Social Security finances.
For about two-thirds of the elderly, Social Security supplies the majority of day-to-day income. For the poorest 20 percent, or about 7 million, Social Security is all they have. Eight percent of elderly beneficiaries are poor, but a startling 48 percent would have been below the poverty level if they had not been receiving Social Security.
Two other points need to be made. First, many of our "problems" (if there are any) with Social Security are linked to the yearly CPI indexing of current and future payments. It would be better to protect payments for all, than continue yearly indexing. Few elected officials have the courage to address this issue.
The second point is that personal returns have a lot to do with timing. Stanley Logue, a retired defense-industry analyst, paid into the system until he retired in 1994. This MIT graduate went back to see how he would have faired if he had gone into the stock market. He pointed out that he retired before the big boom occurred and that the market made little progress from 1965 to 1982.
Will we have street demonstrations by pensioners, as in Russia, whose old benefits are being replaced with counterfeit funds? Will we sacrifice the money for the few in a pullback on the all-important safety net of Social Security? Will we permit the greed and ideologic blindness of an elite to harm the structure of our society in this shell game? I hope not.
Bob Chernow is a Milwaukee businessman.
February 18, 2005, Small Business Times, Milwaukee, WI
