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Social Security Helps Prevent A Poverty-Ridden Old Age

Social security

When I was a young worker paying Social Security payroll taxes into the Trust Funds I was told that the program won’t be there to help me when I need to retire.

 By Al Norman

When I was a young worker paying Social Security payroll taxes into the Trust Funds — which were going to help retired workers on a “pay as you go” basis — I was told the program won’t be there to help me when I need to retire.

For decades, critics of Social Security have been warning that Baby Boomers were going to “break the bank” of the program.

In a recent column in Forbes magazine, John Goodman, who describes himself as “one of the nation’s leading thinkers on health policy,” warned that “the present value of our commitments to the elderly, looking indefinitely into the future, are on the order of ten times the size of the U.S. economy!”

Goodman wants Congress to “encourage each generation to accumulate savings in private accounts in order to fund their own retirement needs. This allows a transition to a system in which each generation pays its own way.”

Former Vice-President Mike Pence told Fox News he wanted to allow millions of younger American workers “to invest a portion of their Social Security in a private savings account.”

The classic view of Social Security dating back to 1949 is that it is part of a three-legged stool: Social Security, private pensions, and savings and investments. The original proposal for Social Security in 1935 included a system of “voluntary annuities” as a supplement to the program. Congress did not pass it.

premium, patient-centered, Social Security, ageist, nursing, COVID, Trump, vaccineWhen President Franklin Roosevelt signed Social Security into law, he acknowledged that “we can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law which gives some measure of protection to the average citizen and his family against the loss of a job and against a poverty-ridden old age.”

The idea of “each generation paying its own way” is economically unrealistic.  According to the Federal Reserve Bank’s Survey of Consumer Finance, in 2019 the median savings and checking accounts balance in America was only $5,300. Less than half of U.S. households (40 percent) said they had enough money to cover an unexpected $1,000 expense.

Americans certainly don’t save enough from their wage income to invest in annuities or the stock market. The Pew Research Center says today’s average wages (after counting for inflation) has about the same purchasing power it did 40 years ago, and what wage gains there have been have mostly flowed to the highest paid tier of workers.

So like it or not, Social Security has become our nation’s one-legged stool. It’s that stool that keeps millions of older people living above the poverty level.

Some politicians drag out Social Security and Medicare every time they want to talk about the Federal Debt Ceiling or the Federal deficit. The message these elected officials want to you to believe is that the nation is drowning in a sea of entitlement debt, and to save ourselves we have to start bailing out on Medicare and Social Security.

But I remember watching Ronald Reagan in a televised address telling Americans: “Social Security has nothing to do with the deficit. If you reduce the outgo of Social Security, that money would not go into the General Fund to reduce the deficit, it would go into the Social Security Trust Fund.”

Economist Paul Krugman published an op-ed in the New York Times in February challenging the notion that the cost of Social Security and Medicare were unsustainable. “I don’t know if people still repeating the old slogans about the need for entitlement reform realize just how much projections of future spending have come down,” Krugman said.

“Congressional Budget Office projections now show social insurance spending as a percentage of G.D.P. eventually rising by about 5 points, which is still a lot but not unimaginably large,” Krugman said.

Krugman notes that half the increase in spending is from the assumed rise in health care costs. “There are things we can do to control costs that don’t involve cutting off Americans’ benefits … It’s not at all hard to imagine that improving the incentives to focus on medically effective care could limit cost growth to well below what the C.B.O. is projecting, even now. And if we can do that, the rise in entitlement spending over the next three decades might be more like 3 percent of Gross Domestic Product. That’s not an inconceivable burden. America has the lowest taxes of any advanced nation; given the political will, of course we could come up with 3 percent more of G.D.P. in revenue.”

Baby Boomers are not going to swamp Social Security or Medicare.  Just nine years from now, the last of the Baby Boomers, who were born ion 1964, will be enrolled in the Social Security program, and the early Boomers born in 1947 will be 85 years old. The senior Boomer impact is rapidly passing into history.

A recent Gallup poll reveals that 45 percent of Americans are satisfied with the current state of Social Security and Medicare programs. The poll found that 63 percent of Americans over the age of 65 feel satisfied with the current state of Social Security and Medicare. 43 percent of adults between the ages of 50 to 64 and 35 percent of those between the ages of 18 and 29 feel satisfied. There were 15 issues that Americans rated worse, like the current state of the economy.

Krugman concludes: “So no, Social Security and Medicare aren’t inherently unsustainable, doomed by demography. We can keep these programs, which are so deeply embedded in American society, if we want to. Killing them would be a choice.”

The Gallop survey shows that Social Security and Medicare programs are “not a major policy concern” for most Americans. Politicians who continue to disparage entitlement programs and frighten consumers, are pursuing their own personal agenda, out-of-touch with the concerns of their own constituents.

Al Norman worked in the Massachusetts elderly home care field for more than thirty years. He has been writing editorials for the 50+ Life for almost as long.

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