But that is not the only problem facing the present system. The return Social Security recipients receive from a life of paying into the government's Social Security system is only about 1.4 percent of the investment. That is a 1930s return on investment. At present estimates, that rate of return will in coming years become a negative return. That is a Great Depression era rate of return.
Private investment accounts pay out over 4 percent. The president's plan for reforming Social Security envisages that kind of a return. Moreover, holders of what he calls Personal Retirement Accounts will be free to bequeath whatever remains in their accounts at the hour of their deaths. That cannot be done by today's Social Security recipients. If there is any money left over, the government gobbles it up.
Critics of Social Security rightly argue that the present system is a huge pyramid scheme. The scheme is heading for disaster, as the ratio of retirees increases vis-a-vis the population supporting them.
Perhaps the bankruptcy of Social Security is not as near and will not be as catastrophic as some think. A tax increase and lowered benefits can keep the scheme going. Yet higher taxes impede economic growth, and cutting back benefits to those who have already been coerced into funding the system is unfair. Better it is to support the president's plan to give retirees a higher return and the option of passing on their Personal Retirement Account to their heirs.
This dynamic vision of society is, I suspect, what really offends the president's critics. They are true reactionaries. They live in the 1930s and tell us that the president is out to repeal the New Deal. But the New Deal cannot be repealed. It is part of American history.
It might even have been the best national retirement program possible in its day. But that was seven decades ago. The economy has changed, and it is time that we develop a retirement program that benefits from that change.