The Only Viable Solution to the Social Security Problem

Signed into law by President Franklin D. Roosevelt in 1935, the Social Security Act was one of the cleverest Congressional decisions in American history. The Act not only offered a measure of confidence to a nation in the throes of the Great Depression, but also provided the Federal Government with a politically safe way to finance other unrelated and less popular programs.

As the dean of capitalism, Adam Smith, explained: Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meets with some opposition [The man was a master at understatement] . . . To borrow of a sinking fund is always an obvious and easy expedient for getting out of the present difficulty. The Wealth of Nations Book Five, Chapter Three.

The U.S. Social Security fund is that kind of expedient sinking fund. By setting the cash-in age at 65, when the life expectancy of the average American worker was 62, assured that at least one half of contributors died before they could claim benefits, and the other half would die soon after. So there would always be plenty of money in the fund to pay benefits and also for the government to garner money without having to raise taxes .

But now that the life-expectancy of the average American is 76, the cash-in age of 65 is bankrupting the fund. To replenish the fund so it can continue to pay benefits and also for the government to continue “borrowing” from it, the cash-in age must be raised, not to 70, as re-election sensitive members of Congress timidly suggest, but to 80. Moreover, either the payments or the borrowing or both will need to be trimmed back until the fund is adequately replenished.

Problem is that contributors to the fund will be compelled to keep on working until well into their 70’s, which few will be able to do, not necessarily for health reasons—many at that age still being capable of holding a full-time job—but because most employers are reluctant to retain workers, or hire new ones, once they reach middle-age. Though technically illegal, age discrimination is standard practice in the American workplace. Barring a stroke of genius on the part of our leaders, the only viable solution at this juncture is to privatize Social Security, as some economists have been suggesting for the past ten years. Let the worker buy his or her individual retirement plan, and the Government create another slush fund to covertly finance unpopular programs—bribes to friendly dictators, for example—without having to raise taxes. The poor who can't afford an individual retire plan would have to find some other way of coping.

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