The US Social Security system is a major joke and a major liability for our children and their children. It currently represents 40% of the mandatory spending programs (social security, medicare, medicaid, etc.) of the federal budget, and 21% of the total federal budget. For each dollar you pay in federal taxes, more than $0.21 goes straight to the Social Security system.
The system was NOT set up as a retirement system. It was created as a safety net for the aged and infirm who really needed help. Of course, today it has become an entitlement, and the government is now in the IRA business instead of the safety net business, which is the only business it should be in (in this regard).
Let’s talk about some nausea-inducing chart curves:
The X axis is years from 1935 through 2004. I’m sure I could dig up data for 2005-2008, but I’m also sure such an effort wouldn’t have any material impact on the net analysis. The Y axis indicates age. The big blue line indicates the expected average life span (Y axis) of an individual born in the year indicated (X axis). The big red line indicates the legal retirement age of an individual born in the year indicated. If you don’t want to do the math on the big red line, it starts at 65, then grows to 66, then grows to 67, and that’s it.
The Social Security system was signed into federal law in 1935. Like a septic system, it started failing the moment it started being used . The guys who created this legislation were basically all born in the 1800s. Think about that. There’s no way they could have foreseen the advancements of the 20th century. If you are so inclined (I do not have the time) you can actually read all of the congressional debate on, and analysis of, the Act from the 1930s here.
These legislators set the age to receive benefits – their definition of “old age” – above the average life expectancy for the time, as the graph clearly shows. 5% above, in fact. My guess is that these guys saw life expectancy improving, but at a very modest pace – perhaps something along the trend of the lower dotted blue line. Of course, the upper dotted blue line shows the actual general trend of life expectancy, which isn’t even close.
The yellow shaded area, between the big red and big blue lines is The Nightmare Zone. This is screwing the budget, and our children, and their children. These two lines are deviating at an entirely unsustainable rate.
The lower dotted red line projects forward (historically, if that makes sense) the very modest changes the government has undertaken to increase the age of benefit eligibility over the years. It seems clear that the government did not intend for the age to be stuck in one place forever. I don’t know the numbers, but I have to assume that even implementing this sort of an ultra-modest change would be fiscally beneficial, if not a per se solution. Now imagine what would happen if we used the index they used in 1935 of benefit eligibility at roughly 105% of the average lifespan? This is the upper dotted red line.
How do we fix this? That’s the N Trillion Dollar Question, no? The good news is that this is fixable. The bad news is that fixing it means scrapping the system as we understand it now, and choosing a generation that’s gonna have to “take it up the ass” as it were.
I volunteer my generation. Someone has to do it, it might as well be us. Anyone born on or after January 1 1965, is out of the current system. Those of us in our late 30s and early 40s have time to save for retirement, even if we haven’t already (or maybe even have a bunch more kids so they can take care of us!). We’ve all heard, and I imagine have gotten, the message of retirement savings that has been beaten incessantly into our heads via every mutual fund company that can buy television advertising. We’re well-educated (read: “well-scared”) on the general topic of retirement. We don’t as a group generally believe the system will be intact in 25 to 35 years anyway – so let’s stop playing ‘pretend’ and actually work to solve the problem.
Reform the whole system. Drastically increase the age of eligibility and structure an index for it based on projected life expectancy. I’ll propose the straw man of that upper dotted red line. Means-test for eligibility. Well-off folks don’t need social security. Anyone born prior to 01/01/1965 is in the current system (though wouldn’t it be nice of them to agree to means-testing and maybe even some upping of the age of eligibility – such as the lower dotted red line). Eventually we’ll be able to lower the OASI tax deduction rate.
So what do you think, folks? Can we get some grass roots action behind this – or something like this?
When was the last time you heard a politician talk like this?
Please watch this video.
Democracy demands that the religiously-motivated translate their concerns into universal rather than religion-specific values … it requires that their proposals be subject to argument and amenable to reason. I may be opposed to abortion for religious reasons – to take one example – but if I seek to pass a law banning the practice, I can’t simply point to the teachings of my church or evoke God’s will. I have to explain why abortion violates some principle that is accessible to people of all faiths, including those with no faith at all.
No matter how religious they may be or may not be, people are tired of seeing faith used as a tool of attack.
Great great post by Ray Ghanbari.
I responded to his survey, though don’t remember where I was in the mix. And for the record, I don’t sip lattes – I drink espresso, thank you very much .
Old, small New England towns are just different. Sherborn was settled in 1652, only 32 years after the Pilgrims hit the continent. We celebrated our semiseptcentennial (350 years – yeah, I too was surprised there’s a word for that!) not too long ago. Sherborn is a town of about 1,500 households and 4,500 residents, and it’s one of the least densely populated towns inside the Route 495 belt. We’ve still got working farms in town!
Last night Sherborn held its annual town caucus. Not to be confused with the presidential party-based caucus hoopla we’ve been immersed in of late, a town caucus is a now-uncommon annual event at which the townsfolk gather for the nominations for the various positions in town government. Most towns have sadly abandoned this process, and apparently only about 30 towns in MA now hold annual town caucuses. Mostly, towns just have candidates submit nomination paperwork instead – how boring!
I enjoy town caucus immensely (perhaps even irrationally) every year. You get to catch up with folks you haven’t seen in forever, meet new neighbors, and get a great read on the political buzz in town. Plus there’s always coffee and tasty baked goods to keep you on your toes!
The 2008 Sherborn Town Caucus was impressively attended, with about 200 residents crammed (and I do mean crammed!) into the room. Great work everybody!
A government which robs Peter to pay Paul can always depend on the support of Paul.
- George Bernard Shaw
This whole stimulus package thing makes me want to wretch. $100B in consumer handouts is going to have a useful long-term impact? Please. Never mind that the country doesn’t have a spare $100B lying about…
I found the CNN/YouTube debate interesting, but ultimately unimpressive.
The concept of a participatory democracy is obviously a powerful one, but the editorial veils of the network (which videos get chosen) and the campaign staffers (how questions get answered) suggest crisply that the powers-that-be surely aren’t ready for frank, open dialogue yet.
What the evening was, was a testament to marketing prowess.
Kudos to YouTube for making this happen. I bet they worked their asses off to get this deal together and to execute on it. A zillion people over the age of 40 will, this week, come to know what YouTube is.
Non-Kudos to the Democratic candidate campaign handlers (their marketers) for sticking to the rote, repetitive responses like it was any other debate. What an opportunity missed to reach out to a younger demographic.
While there were a few moments where a few of the candidates shined, net-net, the evening was about the questions instead of the answers. Interesting, but not ultimately helpful.
I was pointed to this article covering Senator Clinton’s visit to NH today, where she had a lot to say about our country’s economic situation, including these snippets:
“I believe our government can once again work for all Americans. It can promote the great American tradition of opportunity for all and special privileges for none.”
“There is no greater force for economic growth than free markets. But markets work best with rules that promote our values, protect our workers and give all people a chance to succeed…”
“Fairness doesn’t just happen. It requires the right government policies.”
Beyond education, Clinton said she would reduce special breaks for corporations, eliminate tax incentives for companies that ship jobs overseas and open up CEO pay to greater public scrutiny.
High on rhetoric and low on detail, as stump speeches are wont to be. But to this reader, it sounds a bit too much like what Hugo Chavez is touting. Socialism doesn’t work. That horse left the barn a few millenia ago.
I know Senator Clinton is way smarter than to believe this sort of claptrap. So who is she courting? The cynic in me says that the most likely constituency is the half of the nation that doesn’t pay taxes. Sad, unfortunate, and scary state of affairs.