The latest Social Security debate is over whether the problem with the system amounts to a crisis or is "just a problem."
It sure seemed like a crisis the way former President Bill Clinton and others have talked about fixing it ? though, amongst politicians anyway, the desire to fix Social Security has long echoed St. Augustine's prayer for chastity, a virtue best practiced in the future. Lord, help us fix Social Security. But not yet.
Then George W. Bush decided to push for a solution now. And, lo and behold, a good many politicians and interest groups now think Social Security is just a problem. Not a crisis.
In Washington, apparently mere problems don't require solutions.
Those of us advocating personal accounts for Social Security have argued that the present system is not solvent. Yes, currently, workers pay more than enough payroll taxes to cover the benefits paid out to retirees. In fact, there is a surplus that Congress borrows and spends each year. But this surplus turns into a deficit when the baby boomers retire en masse and on schedule. Soon more money will have to be paid out to retirees than is being paid in by workers.
Where will the government get the money to pay these obligations?
Enter Robert Samuelson, son of an economist (which, now that I write it, seems awfully like some sort of postmodern pejorative) and popular Washington Post columnist, who argues that the government has no Social Security obligations at all. Workers paying into Social Security are actually owed nothing, nada, zilch.
Thus, there is no solvency problem.
Samuelson's point is extraordinary . . . but true.
And in a sense, it's old news. The U.S. Supreme Court, in Flemming v. Nestor, ruled that the generational contract we know as Social Security is really not a contract at all, that regardless of what a worker has paid into Social Security, the benefits are whatever Congress decides at any given time.
So, Samuelson is as precise as a pedant. When the system runs short of cash ? and payments to retirees consume all the payroll taxes plus about half of the remaining federal budget ? Social Security can easily handle the problem by slashing your benefits to pennies on the dollar. Or Congress can sock workers by raising payroll taxes.
In other words, the government really doesn't have a Social Security problem . . . but you and I do.
Like you, I'm trying to save as much money as I can. But I've got kids to feed and clothe and educate. A mortgage to pay. Still ? and don't tell anyone ? I'm getting older. And I'm certainly old enough to realize that I'm speedily approaching that age I'd like not to have to lift that bale or tote that barge ? even metaphorically.
When that time comes, I plan to continue to stand on my own two feet ? if perhaps with the assistance of a cane, or a walker, or a Segway. I want to eat the bread I've earned, and pay my own way. Not depend on the kindness of strangers, or even of my family, friends and neighbors. It would be nice to count on Social Security, into which I've paid a small fortune, but . . .
Like so many Americans who've not yet reached the quinquagenarian's respected age, I've written off the payroll taxes I've paid and continue paying, despite the fact that they could be a huge benefit to my retirement. Why?
Because I don't control that money. The politicians in Washington do.
From the very beginning of Social Security, the politicians have been investing the system's surpluses not in profit-making enterprises, like insurance companies, banks, and even lawyers running old-fashioned tontines do. Nope, they've simply borrowed the money. They've "invested it" in spending.
And soon those IOUs will come due. When that happens, Congress, which has trouble even approaching a balanced budget, much less running a surplus, will have do that very thing ? run a surplus to begin paying off its biggest creditor, the Social Security Administration ? or else do precisely what Samuelson suggests, cut benefits drastically, or else raise payroll taxes going directly into Social Security.
Think for a moment what this would mean. To run the mythical surplus in its general revenue accounting, Congress would have to cut spending or raise taxes, or both. Drastically. Considering that even in those heady few years of the Clinton administration when we talked about the return of budget surpluses, Congress did not, on net, pay off any debt, you can see how enormous the problem is.
I mean, crisis.
To call it anything else strikes me as mad as Mad's What-Me-Worry mascot. No, madder. Next to a politician, the grinning Alfred E. Neuman is the very picture of sanity and sobriety. (Sketching the character of our rulers is one of the set tasks of my Common Sense e-letter, which brings to mind more often than not the satires and buffooneries I read as a kid in Mad.)
After all, were Congress actually to do what Samuelson suggests, we'd all be Hopping Mad ? or just Voting Mad. Which even the most entrenched politicians understand is not something to want in voters hovering in the vicinity of a ballot box.
So what to do?
The answer, I think, is simple. Bite the bullet. Privatize. To the furthest extent politically feasible. Save our retirements. Save Social Security.
The key is to establish meaningful personal accounts that would, finally, establish true contracts, where the money Americans invest in their retirements belongs to them and not to the politicians in Washington.