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The latest article from Walter Williams - distinguished, black economist.
quote: I cringe with disgust when I hear politicians say, "We're doing it for the children." What's worse is so many Americans mindlessly fall hook, line and sinker for the hype. Judging by our actions, Americans could not care less for future generations, and future generations will curse us for it. Let's look at it.
According to several respected authorities, including the Concord Coalition (co-chaired by former Sens. Warren Rudman and Robert Kerrey), the Congressional Budget Office, U.S. Treasury Secretary John Snow, and the Social Security Administration, the estimated present value of the unfunded liability of Social Security and Medicare ranges between $61 trillion and $75 trillion dollars.
"Williams," you ask, "what's this present value business?" Simply put, between $61 trillion and $75 trillion dollars is the money that would have to be put aside right now, at current interest rates, in order to meet future obligations of Social Security and Medicare. To put an astronomical sum like $61 trillion or $75 trillion in a bit of perspective: The value of our entire national output of goods and services (GDP) in 2004 was only $12 trillion.
Congress can't put aside $75 trillion as reserves against future liabilities of Social Security and Medicare. Therefore, according to the Dallas, Texas-based National Center for Policy Analysis (NCPA), the annual rate of Social Security unfunded liabilities is growing at a $667 billion clip and Medicare's at $4 trillion.
What does all this mean? It means little in pocketbook terms to today's Americans who are 65 years or older. They will collect their Social Security checks and their promised Medicare benefits, but not so for future generations. Here's that future according to House Ways and Means Committee testimony, given by Dr. John Goodman, president of the NCPA (May 2005). "In 2020, combined Social Security and Medicare deficits will equal almost 29 percent of federal income taxes. At that point the federal government will have to stop doing almost a third of what it does today. By 2030, about the midpoint of the baby boomer retirement years, federal guarantees to Social Security and Medicare will require one in every two income tax dollars. By 2050, they will require three in every four." And by 2070, Social Security and Medicare will consume all federal revenues.
There are some "optimists" who seek to minimize the pending disaster that will be caused by these and other federal unfunded liabilities. They argue that the federal government can always meet its obligations through its power to tax. According to some estimates, by 2030, Social Security and Medicare obligations alone will require a 50 percent increase in payroll taxes. If tax increases are off the table, 2030 will see a 30 percent reduction in promised Social Security benefits and stringent rationing of health care services promised by Medicare. There's another "solution." Even though Congress can't increase our life-expectancy, they can raise the age of Social Security and Medicare eligibility. Were Congress to make 80 as the age for Social Security and Medicare eligibility, they'd solve the problem because most of us would be dead.
Let's look at the raw politics of the Social Security/Medicare situation. Few, if any, of our 535 congressmen will be around in 2030 and later when the real crunch comes, but they are subject to today's, not tomorrow's, political pressures. Similarly, few of today's Americans 65 years of age and older will be around. Other than mouthing a concern for future generations, both have little economic incentive to be concerned about what happens in 2030. After all, what do they have at stake?
In 2030, will young people in the labor force be willing to see themselves taxed at Social Security rates of 20, 30 and 40 percent to take care of some old people? I don't think that will politically fly, and they might begin to get ideas about euthanasia. In addition to economic strife, Social Security and Medicare are laying the groundwork for intergenerational conflict. Unfortunately, the politics of today don't give us room to prevent these twin disasters.
Dr. Williams has served on the faculty of George Mason University in Fairfax, VA, as John M. Olin Distinguished Professor of Economics, since 1980.
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See, I grew up with the belief that I'd never see a dime of Social Security. So the first job I had where I could put money in a 401(k), I contributed to the max of my employer's match. Now (not quite 20 years later), I still contribute even though my employer doesn't match. I have a ROTH as well.
Personally, I think it's very healthy for today's generation to figure that we aren't going to see a penny of Social Security, so that we can plan our own retirement by saving today. But that's not what I understand, statistically, is actually happening. Not a lot of people contribute to a 401k, under the mistaken idea they can't afford it. Scary.
I'm more than willing to forego my entitlement to Social Security if they'd go ahead and just plan for an end to the program some years hence. That way people can plan realistically.
Posts: 5948 | Registered: Jun 2001
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posted
I don't think so. The politicians can't mess with Social Security; they would suffer too much backlash from senior citizens, of whom a great percentage turn out to vote. It is more likely that the government will begin taking more out of paychecks to cover Social Security, which basically sucks for those of us about to begin working or those already doing so.
Posts: 155 | Registered: Apr 2005
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I think they should start a gradual cutback of social security benefits. Maybe start it in 10 years, but then slowly reduce the amount incoming retirees are given, keeping older people at the higher level.
For better or for worse (for worse!) the elderly rely on their social security checks, and we can't take them away cold turkey. But if people who haven't yet retired understand NOW that they aren't going to get as much, they will start saving, and the younger generation will realize that they are basically giving their money away, never to be seen again, and they will likewise act accordingly.
If I were politicians, I'd be more concerned about losing the vote of the youth, we'll hit a tipping point eventually and backlash will be heavy. If there's one thing that will drive the youth of America to vote, it's dollar signs.
Posts: 21898 | Registered: Nov 2004
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I think a gradual phase-out is the answer. Allow people who are already working to opt out of social security payroll deductions, and forfeit any future benefits. Allow those who have already paid a bunch of money into the system to keep paying into it until they retire and keep their full benefits when they retire.
In the short term, this would probably cause the national debt to increase significantly as a bunch of younger workers opt out of the program. However, as time goes on, there will be fewer and fewer people collecting benefits and eventually social security will be a thing of the past.
In the meantime, the government could sell "retirement bonds" or something to raise money for the retirees' benefits, money that would earn interest and be paid back at a later date just like a savings bond.
Posts: 45 | Registered: Jun 2000
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I would really love an apology from government for stealing the social security money in the first place. I know the exact people aren't all in government anymore, but I want an apology anyway. They never should have spent the money, then all the money individuals put into the program would be exactly what they got out.
Should have been a system where you pay in and when you retire, you collect that money plus interest. When they started the program, the already old people wouldn't be participants because they hadn't paid any money in--since the program hadn't existed yet. Let them have money from a separate source or something.
I live in my own little world. I am okay with this.
Posts: 2880 | Registered: Jun 2004
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quote:Originally posted by jeniwren: See, I grew up with the belief that I'd never see a dime of Social Security. So the first job I had where I could put money in a 401(k), I contributed to the max of my employer's match. Now (not quite 20 years later), I still contribute even though my employer doesn't match. I have a ROTH as well.
Personally, I think it's very healthy for today's generation to figure that we aren't going to see a penny of Social Security, so that we can plan our own retirement by saving today. But that's not what I understand, statistically, is actually happening. Not a lot of people contribute to a 401k, under the mistaken idea they can't afford it. Scary.
I'm more than willing to forego my entitlement to Social Security if they'd go ahead and just plan for an end to the program some years hence. That way people can plan realistically.
I agree. If at age 25, you can put just 250 a month into a 401k, and do so for only 5 years, then by age 65 you will have about 1.5 million dollars to retire on, assuming about 10% return per year. (Stock market has historically averaged 12% over the long run). For some, employers even match 50-100% of your contribution. Its like social security only private...you and your employer each put in half. Even at working minimum wage if the current social security tax on the employer and employee was put into a private fund, that would be $125 a month. Over the course of a lifetime that is also enough to create a nice little nest egg. Of course people try to incite fear in old people when the word privitization is mentioned in conjunction with social security. And a vast majority of young people just don't care.
Of course if MTV and rock stars were actually concerned about getting young people out to vote and caring about the issues, rather than just getting numbers to vote for the sponsor's presidental favorite, then matters might change. To me as a 25 year old young man, Social Security is one of my top 5 political concerns.
Posts: 1412 | Registered: Oct 2005
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