On the Ides of October the first Baby Boomer applied for Social Security retirement. Not disability, mind you: retirement. A Maryland teacher, born a second after midnight on Jan. 1, 1946, will become eligible to receive early retirement benefits next New Year’s Day.
And so begins the next crisis of the American political economy.
When Social Security was set up, its supporters pooh-poohed critics who warned that by not investing the collected funds the government was setting up a major fiasco. The pooh-poohers were wrong, of course; the skeptics, right.
There was no investing going on. Money came in to the government. What did not go out to the early pool of recipients was sent to Congress to cover its deficits. Ostensibly, money that was supposed to pay future beneficiaries became IOUs that Congress owed those beneficiaries. They legally plundered the kitty.
And the huge post-World War II Baby Boom helped keep the system afloat. You had this surge of young workers paying in, not taking much out.
But still, the system was so unstable that, throughout the sixties and seventies and eighties, FICA taxes to support it increased . . . increased so much that the FICA withholding, for many Americans, has grown to exceed other federal taxes.
And now the end is in sight. All those Baby Boomers whose FICA withholding kept the system afloat all these years now begin to retire. Soon, the money going to retirees will far exceed money coming in. And the crisis point will have been reached.
What to do?
It would be naive to say “Let Congress just pay it back — after all, those politicians merely borrowed the money; we just ‘owe it to ourselves.’”
It would be naive to say this, because the members of Congress don’t get their mad money from their own bank accounts. They take it from taxpayers. Forcing more money from taxpayers to give to a subset of taxpayers is more (and boy, do I mean more) of what Congress has already been doing. Besides, there’s something indecent even about suggesting that we must now raise taxes to pay off people who had been taxed long ago for the fund in question.
The best reform would be to put investment back into the pension system. Somehow. And soon.
Putting the whole thing on an investment basis is essential, yes. But we still have to pay out generations expecting retirement help whose funds were not invested. Raise FICA taxes? Been there, endured that. Raise the retirement age to, say, 72? Yikes.