October 15, 1997
Politicians demagogue so much about children that if Samuel Johnson, who told us that “patriotism is the last refuge of a scoundrel,” was alive today, he'd probably change patriotism to children.
Let's pretend that politicians and other elite really care about children, then how about a few Social Security facts (available from the Social Security Administration)?
When infants who are born today enter the labor force in 2020, they will face a 24 percent payroll tax to finance Social Security checks and Medicare payments. Toward the end of their work lives (2065), the payroll tax will be 35 percent. That's the more optimistic scenario. According to the Social Security Administration's “pessimistic assumptions,” which many investigators believe are far more realistic, it's worse. In 2020, the Social Security plus Medicare payroll tax will be 32 percent, and by 2065 it will be 59 percent to honor today's promises. These tax bites do not include federal income taxes.
Those are the projections. We won't see 32 and 59 percent payroll taxes. I cannot imagine future generations giving up a third to almost two-thirds of their earnings to take care of a bunch of old people. The Social Security system will have collapsed long before. In fact, Social Security is projected to start coming apart by 2011 or so. Not to worry—people receiving, or about to receive, Social Security checks, like I am, shouldn't be alarmed. We'll rip off young people and be dead or comatose when the disaster strikes our children and grandchildren. We will have ridden their backs, and the worst they can do to us is curse our memory.
There's little evidence that Americans, particularly politicians and retirees, have the courage and willingness to talk and think reasonably about our pending Social Security disaster. Barry Gold-water sounded a warning in 1964, and it probably cost him the presidency. In 1985, Ronald Reagan suffered political heat for merely mentioning the problem. Steve Forbes risks his presidential aspirations for being open and honest about Social Security.
In order to avoid economic chaos we must own up to the fact that Social Security cannot be fixed. Other countries such as Chile, Australia, the United Kingdom, and Singapore recognized this and switched from their government-run Ponzi schemes to private savings programs that provide pensioners with a safer and wealthier retirement.
While each program differs, and are in different stages of transition, their structures are quite similar. Workers put a percentage of their earnings in private pension funds that in turn are invested in stocks, bonds, real estate, and other income-producing assets. When workers retire, they use all or part of their accumulated wealth to purchase annuities that guarantee them an income, for the rest of their lives, up to three times the former government program. These countries have “safety net” retirement programs for the few workers who have inconsistent work records and very low wages.
Several national think tanks have developed sound analyses and proposals for avoiding the coming crisis. Among them are the Washington-based Cato Institute and the Heritage Foundation, along with the Dallas-based National Center for Policy Analysis. Highly respected scholars have done the idea work but it's going to take pressure from the people to get Congress off its duff.
The bottom line is if people care about children as much as they pretend, they'll support the few politicians, like Steve Forbes, who have the courage to openly acknowledge that Social Security needs to be scrapped and retirement privatized.