"Unencumbered"
Tom Toles on Social Security today on washingtonpost.com.
Comments
The cartoonist depicts the senior citizen to fit the profile of a lower-income woman, who complains about her empty personal account.
Business Week, in its January 24 edition, published a short commentary suggesting that, under a voluntary personal account system, lower-income workers generally fare poorer because they generally do not adopt personal accounts. The commentary argues that mandatory personal accounts work better.
The commentary is supported by a January 19 Wall Street Journal column by Jonathan Clements. Mr. Clements, whom I probably have recommended before, ran through the numbers and concluded that money in personal accounts, as currently proposed, is very likely to yield greater benefits than the current Social Security system. Presumably, many lower-income workers do not read Mr. Clements' column.
Business Week has a good and relatively comprehensive report on Social Security in its January 24th issue, located online at http://www.businessweek.com/magazine/content/05_04/b3917001_mz001.htm. Their editorial is also worth reading, but it is only in the print edition.
So the debate seems to come down to whether Social Security should best be a safety net for low-income retirees, which could be more financially efficient but mostly does the job of keeping most retirees out of poverty, or a higher-return savings vehicle for those who are more affluent, which does a good job of helping those who help themselves but lets people who aren't wise enough to help themselves go hang.
Fair summary?
I agree that one aspect of the debate comes down to this - is Social Security a safety net or a retirement plan? The two concepts overlap, but most people would envision a safety net as (1) subsistence level and (2) generally provided by the community and a retirement plan as (1) some level of comfort and (2) more often controlled by individual choices.
This is an issue which I believe should be clarified at the start of Washington's Social Security debate, which means that it probably will not be. If Social Security is a safety net, then it should be a common pool from which the community supports its members. If Social Security is a retirement plan, then it can be personal assets.
I would generally agree that Social Security should be a safety net, not just for low-income retirees, but for everyone. The fact that one earns a high income while working or has income at some point when too old to work does not mean that state of affairs will always continue. That is, I believe, the basic concept behind Old Age Insurance and Survivors Insurance - the two Social Security components most people mean when they discuss Social Security.
Having said all that, I remain dissatisfied with the number of people who seem to rely upon Social Security as their retirement plan. If society views Social Security in this way, perhaps we should just implement personal accounts. But I would prefer that the social contract be this - Social Security will give you a subsistence-level standard of living, if you don't save you may need to work longer than others, accept a low standard of living, or rely upon family support.
I would prefer that the social contract be this - Social Security will give you a subsistence-level standard of living, if you don't save you may need to work longer than others, accept a low standard of living, or rely upon family support.
I agree wholeheartedly. I have no evidence to support it, but I imagine that a sizable majority would also agree.
Knight-Ridder newspapers published an interesting article this weekend on Social Security: Social Security Overhaul is Long-Standing Conservative Dream. A copy is at http://www.commondreams.org/headlines05/0205-05.htm.
The article highlights the point at which I break with many conservatives on the issue. I generally believe that the Social Security/Medicare tax has to stop growing or recede, that benefit growth is too much, and that age eligibility should be increased, perhaps dramatically. I generally view programs such as Social Security as a matter of grace rather than entitlement - society provides this safety net because that it is what it ought to do, not what it has to do. But, I don't see how these beliefs are inconsistent with the existence of the Social Security program.