Wednesday, May 02, 2012
Social Security was a "windfall" for older people, a stiff for the young, relative to amount collected in FICA "taxes"
The May 2012 American Spectator has some stern lectures on Social Security.
On p. 22, David N. Bass gives us “The Millennial Perspective”. The caption is “Social Security won’t be there for today’s twentysomethings. Yet their piggy banks – and 401(k)s – remain empty”.
His terminology for Generations X and Y may not be standard, but he makes an interesting point I haven’t contemplated. Baby boomers who started working before 1970 paid only 6.5% of their earnings into the Social Security “entitlement”, are retiring now and are, according to politicians, promised full benefits, delayed only slightly. Today, young people surrender 12.4% of earnings, and will see little or none of it.
Do Bass’s numbers include employer contributions? Self-employment tax? It appears so. Do the numbers include the current “Social Security Tax Holiday” of 2%? Unclear.
But here’s a point. If Social Security is regarded as a “tax”, there’s more legal or constitutional heft into the idea of reducing benefits for current beneficiaries (or means testing them) and giving them to younger future beneficiaries.
Bass points out that young people aren’t saving much on their own. With increasing student loan debt and weaker job markets, is it any wonder? They do have some ability to build their own social capital.
The link is here. Bass's article was written before the Social Security compressed its life expectancy by three years; he gives the end-date as 2037, and it's now 2033.
The issue has similar coverage of the Social Security and Medicare decline by James Pierson (p. 10, “A Time for Choosing”) and Rep. Paul Ryan (p. 14, “Empowering Individuals or Bureaucrats”?)
Like these observers, I’d love to see people have accounts that they “own” and that can’t be confiscated by politicians. But you have to stiff people to set that up.