“At My Age Topics Like This Become Really Interesting”

 

It's popular in some quarters to demand that the U.S. federal government renounce parts of the contract it made with America's workers in the Social Security Act of 1935, with its various extensions and ramifications. “Further renounce,” I should probably have said.

Criticism of the Social Security Act began even before it was passed. For example, it was objected by factions then called conservative that the government couldn't possibly deal with the problems involved, since there was too little tax money available to support those already too old or almost too old to support themselves. The way the government got around that was to allot the funds collected from each generation of workers to the support of the previous generation of retirees. This made the system operative immediately, but at the cost of creating a "contract" whereby each generation, in order to protect its own ultimate right to retirement, would contribute to the retirement of its parents. Actually, in a way this had always been the way things worked for the fortunate, because, when one became too old to work, one's children had been expected to furnish support---provided one had surviving children---who were able to earn more than enough for their own survival. That way of life had worked fairly well among European middle classes. The rich had their land and investments, which tended to work well for them. But the poor, for whom crime and starvation were everyday problems, had always faced an old age---if any---ranging from difficult to horrible. Still, all classes used to experience death rates sufficiently high to partly conceal many of the problems of old age.

In America, the thought of large numbers of people obtaining money derived neither from the immediate labor of their hands nor from their shrewdness in managing investments was painful to many, especially since times were tough. Those who had money---whether a lot or a little---were inclined to think they had obtained it by being "better than” the less fortunate, whom they preferred to call the "less able." But to the majority, then as now, the difference between "less fortunate" and "less able" seemed both valid and crucial. So, again a solution was found. The amount of retirement money received was to be, first of all, relatively small: enough to stay alive, but without any luxury. Also, the amount was soon made to depend on the time the worker had labored and the amount earned, so that virtue, whether in the form of long persistence or of high ultimate income would be modestly rewarded.

These compromises didn't deal with all the problems. It was objected that workers who knew they had a government-funded retirement system to look forward to would neglect to save any money for themselves. Since the people the system was apparently trying to protect tended to be unable to make any more money than it cost them to live, this was certain to be true in more cases than not, and moreover, the poor were particularly likely to spend any apparent surplus on what was seen as unnecessary (i.e. for the poor) luxuries, such as beer and cigarettes. The same argument against the "necessary luxuries" of the wealthy was irrelevant, since they could afford, even after buying these, to make the investments that would protect their old age against the need to work after becoming unable to do so. Often these investments had been made by their ancestors, and had protected them from labor in their youth as well.

It was also objected that a worker might collect his or her social security retirement benefits and go on working, thus defeating one of the purposes of the legislation: to help younger unemployed people move into jobs vacated by retirees.

These arguments contributed to the decision to keep social security retirement benefits at subsistence level, so that those who had the means and the will power to save money for themselves might see the point in doing so. They also contributed to the decision to minimize crediting money earned after retirement toward social security benefits. To keep the nation from seeming mean-spirited, however, three concessions were eventually made: first, social security benefits were (originally) not to be taxed; second, a worker who began collecting retirement benefits but who continued to work would have only part, not all, of his or her wages subtracted from the benefits; third, money obtained not from labor but through other forms of prudence (investments, employee pensions, rents, etc.), wouldn't be counted against social security benefits.

The years have seen a continuing conflict between those who felt that the whole system was a device of the devils of liberalism for rewarding ungodly indolence and those who felt it had been made so restrictive by the demons of conservatism that it often failed to accomplish its godly objectives. During the many alterations that have been made to social security programs, it was often difficult to decide whether demon conservative or devilish liberal was at work. For example, it was not "socialistic New Dealers" who objected that giving each worker a social security number would result in the government's being able to track an individual in the manner of most European nations. Legal restrictions on the uses to which social security numbers could be put were made part of the law in order to circumvent this problem. As the reader knows very well, more conservative times found a change of heart to be convenient, so that for several decades, every Suzan, Tom, Myrtle, Dick, Flo and Harry expected us to rattle off that formerly private number not only---as originally intended---to enable an employer to deduct the appropriate tax, but also in order to open a bank account or cash a check, borrow a videotape or rent a car, or to sign up for college or a credit card. This change came about almost without comment, because as the European practice of trying always to know who was where diminished, fear of duplicating it in America also diminished. (And after all, there's a chance it could contribute to good law enforcement.) Besides most people who remember what the original point was supposed to be had grown old and died.

More recently, attention has focused on whether the whole system can possible be "fair." It seems the number of us who live to be relatively old has increased, so that the number of average workers whose social security taxes are needed to support an average retiree has increased by leaps and bounds. Since the money path from worker to retiree is relatively clear when the Social Security System is the intermediary, projections into the future reveal alarming possibilities; one early report had it that by the time the "baby-boomers" begin to reach retirement age, about A.D. 2010, the ratio would be two workers per retiree. That is, two people's labor will support three people, the two laborers plus one retiree. That's not counting the workers' children or other unemployed dependents. Since this ratio is not as "favorable" as the one that report cited for 1945, namely 46 to 1, it seems clear that some sort of "unfairness" must exist. Either the workers of 1945 were paying too little or those of 2010 will be paying too much. I don't know whether the ratios cited by that source are proving accurate or not; I've seen reports citing other ratios ranging from considerably better to even worse, but all sources seem to be agreed that a problem is certainly arising as "baby-boomers" retire.

There are other things to worry about, too.

Suppose the social security system were somehow to go out of existence in a relatively painless way, and suppose that all the workers who now expect social security were to find---presumably miraculously---both the ability and the will-power to put money aside. For a number of reasons, national policy prefers that this money be saved in the form of investments of one kind or another, though the possibility of putting the money "under the mattress" must also be considered. Although nobody thinks all this could happen, many present-day conservatives believe it would be a wonderful development.

But would it? The reason money is good in old age is the same reason money is good at any age: it can be used to buy goods and services. Where do the goods and services come from? There is no way to waffle on this: whatever benefits the rewards of our economic system may contribute, and however heavily they may do so, the production of goods and services can't occur without somebody producing those goods and performing those services. That fact remains true despite the fact that Marxism, ostensibly based on it, has apparently crashed-and-burned. Thus, if there are, in the year 2025, precisely two people producing goods and performing services for each person who is not producing goods nor services but who is obtaining these by drawing money from dividends, interest, rents, and mattresses, then the effect is precisely the same as if the money were being obtained from social security: two workers support three people. That's still not counting the workers' children and other unemployed dependents.

Various “attainable” scenarios have been proposed. One, so far rejected, was to privatize Social Security. This was supposed to be equivalent in its effects to the modest proposal just dealt with except for probably not being painless and probably not being successful in encouraging other forms of saving. In any case, by itself it was subject to the same objection: the same ratio of workers to retirees that is supposed to doom Social Security remains the ratio of workers to retirees. It is, true that abuses in federal budget and finance that many believe exist at present would disappear, but who will deny that they would simply be replaced by unknown and unpredictable private abuses? There has never been a period in history when the private sector was free from fraud. Never! Of course, some may see it as an advantage that private insurers would be permitted to go bankrupt, leaving their insureds, of whatever age, to work or die.

A suggestion that is often made is to eliminate or diminish the extent to which a retiree can collect more than he or she contributed. To a certain extent this process was already put in motion when it was agreed that, above a certain income level, half of social security retirement income would be taxed after all. This is certainly an abrogation of the original contract, as was the further raising of the 50% taxable figure to 85%, but both are designed largely to avoid letting people collect tax free benefits that, on the average, exceed the (taxed) money they paid in. If the amount one paid in were made an absolute limit on benefits, inflation would see to it that people who depend entirely on social security for a livelihood would gradually lose the goods and services on which their survival depends. This plays well to those who feel that the penalty for failing to achieve financial "success" should be death, though even among conservatives this view may not be as popular as it was when I was in high school. (Yes, some of my then fellows---I think I should casually mention their political persuasion; but I won't---did claim to hold this view. A few of them are surely now functioning in some level of government. I don't know whether they ever changed their minds or not.) Again, those who succeed in saving money and only then stop working will still be a burden on those who are still working; however in this case it may carry an illusion of “morality,” and perhaps the deaths of those who did not save will reduce the burden to levels workers will accept.

Another common suggestion is that we discontinue penalizing workers who elect to continue gainful employment after they "retire." The reason this might work is that those workers will still be generating input as well as output to the social security system. It is certainly true that people who keep the same proportion of the dollars they earn as do other people will have more incentive to continue earning than people for whom this proportion is reduced to nearly nothing. So the only objection is that the effect may be rather small. At the other extreme is the suggestion that all income, not just earned income, should pay the social security tax. The philosophy behind this idea has already found its way into law in the provision already mentioned that retirees pay taxes on part of Social Security income if their total income exceeds a certain amount. At one time the only form in which even stronger forms of this idea were being widely voiced was the proposal that those earning more than $100,000 per year voluntarily forego taking any social security income. Big income people---if $100,000 really is big income, since just because it's a lot more than I ever made doesn't mean it's luxurious for those whose professions doom them to live in New York or Los Angeles---divide into three classes: those who say “forget it,” those willing to give quietly part of their substance to causes they regard as good, and those only willing to be generous if their contribution can be publicly noted in order to add to their reputation (and further income). Some of the second group may voluntarily decline Social Security, but few of the third will do so unless a kind of national honor roll is set up. In any case, once they cease to produce goods and services, they still contribute to the ratios involved in the above "fairness" argument. Social Security as a specific program may be helped, but the situation for the average worker is not.

Well, but are there suggestions that can work?

In fact, there are four areas where an attack on the problem of the 2 to 1 ratio in 2010 could conceivably (and theoretically) be mounted. Two of them attack the ratio itself, and the other two accept the ratio, but attack the consequences of it.

Suggestions made so far have concentrated almost entirely on one of the approaches, i.e. trying to diminish the outflow of the system by reducing either the number of retirees or the amount each can collect. In its extreme form, this comes down to "kill the aged." Those of us already past our working prime are strongly opposed to this, and we're not entirely happy, anyway, about insisting that the only solution is to make things at least somewhat worse for retirees. That would fall far short of the wee slice of pie in the sky we were promised throughout our working careers.

Hypothetically, a second mode of attack on the ratio might be to try to enlarge the number of workers in 2025. Some methods of reducing the number of retirees (e.g. raising the retirement age to 70) also contribute to this approach. Classical civilizations that needed more workers simply tried to conquer other countries, but that's not a feasible alternative for the United States in the twenty-first century. The closest we could come might be to find a way to extend our Social Security System to cover workers in other countries, but the problems in doing that are enormous, beginning with the matter of how other countries might be persuaded to assume the burden, and continuing with the problems generated within the U.S. among those who fear every social alliance with any other nation. Conceivably (no pun intended) an enormous immediate increase in our own birth rate might be possible, though at such great expense that it is difficult to imagine that the nation is willing to pay the price. Even if that were possible, workers born in 2010 will not instantly enter the work force, and even when they do, why would they be willing to sacrifice if they are uncertain about their own fate. And, unless the baby-mill is made perpetual, just think of the problem by 2050!

Besides attacking the ratio itself, we have also the option of attacking its consequences. Thus a third mode of attack on the problem is to reduce the needs of the retirees of 2025. In a society where a great fraction of its resources is devoted to advertising in order to create artificial needs, this may be difficult, but there are at least some things that might be done. Early implementation of an efficiently managed federal system of health care could reduce needs for services enormously by causing the retirees to be healthier, hence to need less health care as well as by reducing the cost of the medical care they require. Of course, making them healthier would probably make them live longer, which has to be taken into consideration. (Incidentally, "efficiently managed federal system" is not necessarily an oxymoron, despite the fact that many today believe it is. Certainly there is no reason to believe a non-federally managed system would be particularly efficient, since without extensive---and expensive---government regulation it would offer enormous opportunities to thieves and swindlers. Moreover, if one can be persuaded to be objective rather than---or at least before---reciting anti-government slogans, one can find examples of generally very efficient federal programs, as well as federal programs that were efficient until their most efficient features were "privatized," leaving only their most expensive chores in federal hands.

How else could we minimize retirees' needs? A few ideas come to mind, though means for overcoming opposition to them do not. Elimination of America's national policy of "planned obsolescence" could cut the need for retirees---and non-retirees as well---to replace appliances and other items that should last a long time but don't. Simply halting the subsidization of the production of harmful substances (tobacco comes to mind, and our present national drug policy may be tantamount to a subsidy) would help save retirees from imagining they "need" them. Taxing such products heavily can help, too. There are undoubtedly a significant number of possibilities along these lines, although for the government or anyone else to intervene in such matters can be anathema to powerful interests that care little about long-term social and economic problems other than their own. Worse, many retirees must make do with much less than they had before retirement, so the improvement possibilities may not be extensive for the retirees themselves. Savings by cutting private waste, however, can also help.

Fourth, it might be possible to increase productivity of the work force sufficiently to make the 2 to 1 ratio (or whatever numbers turn out to be correct) a reasonable one. For example, if productivity could be increased to the fabulous factor of 23 to 1, the available goods and services would be equivalent to those of 1945, when "the ratio" was "fairer." Actually, 1945 is kind of a funny year to use for reference, since it comes just at the end of World War Two, not during a period that might somehow be construed as "typical." By 1950 "the ratio" may already have been as small as 15 to 1, and 1950 was a relatively prosperous time.

The necessary decision-making can't be accomplished merely by reciting slogans such as "cut entitlements" or "don't touch social security" or "all the government does is tax and spend," or "supply-side," or "new directions," or reversion to one of the old and antithetical extremes "comes the revolution we'll all have peaches and cream" or "supply and demand, market driven economy." Slogans organize mass movements, but they do not solve problems. Sometimes neither does careful analysis, especially when hampered by people who believe they already have the solution before they understand the problem and who think the only reason to inquire further is to find ways to support their "solution." However, understanding has a better chance than sloganizing. The analysis needs to look not just at social security as if it were somehow isolated from the rest of the economy, but at the whole complex matter of where the goods and services obtained from money saved or invested comes from. It also needs to study what circumstances justify requiring some people to support others. If the answer to that last question is "none whatsoever," I may not have long to live, since I'm too decayed to create much of my own food and clothing, and I'm certainly too decayed to find a job that I can still do in today's world. Of course, in that case most other retirees, all children, and one hundred percent of the idle rich will be required to starve with me, as will a great many of those who provide inessential services rather than material goods, and even all the folks who produce objects nobody really needs.

Reference: . Jack Anderson, 'Why Should I Pay for People Who Don't Need It?' Parade , Sunday, February 21, 1993, pp. 4-7.