Why I oppose private SS accounts
The Zero Boss asked why I oppose private accounts in Social Security. It’s a reasonable question, and he asked nicely, so I’ll try to answer it. And maybe I’ll get some more links. (That’s a joke — Shakespeare’s Sister reports that one of the reasons the leading male bloggers don’t link to women is women don’t write about Social Security. Via Feministe.)
Let’s start with a graph that I’ve showed on this site before: http://www.census.gov/hhes/poverty/poverty03/pov03fig04.pdf What this shows is that Social Security has been remarkably successful in reducing poverty among the elderly. As late as 1967, 30 percent of all the elderly in this country were poor; today it’s just over 10 percent.
So, what’s the problem? Well, there’s no immediate problem at all. For some years to come, even without any changes, Social Security taxes will bring in more revenue than the program pays out in benefits. And then, as the baby boomers start to retire, there will be a period where the benefits exceed the revenues, but the program is paying out from the surplus that’s been built up over the years. And then, finally, there will come a date when the surplus is all gone, and the benefits that have been promised still exceed the anticipated revenues. This is estimated to occur somewhere around 2040, plus or minus a few years depending on whose figures you’re using.
This is a problem, but not one that seems insurmountable if anyone was really motivated to solve it. We put off the retirement age a few more years; we raise the cap on the amount of wages that are subject to Social Security taxes; we fiddle with the inflation adjustment; it all works out. (The problem of health care costs for the elderly is much more intractable, but somehow Bush has decided that Social Security is in crisis and Medicare isn’t.)
Diverting some of the taxes towards private accounts only makes the funding gap worse. And while Lindsey Graham has indicated that raising the cap might be on the table, the Administration still says it’s not. So, the only way that they’re willing to consider closing the funding gap is to cut benefits — and the private accounts proposal just seems like a smokescreen to try to hide that.
Moreover, it’s important to remember that Social Security isn’t just a retirement program. It also provides both disability and survivor’s insurance. And while a private account might add up to a reasonable amount of money after 40 years, it’s not going to provide anything significant to the person who is disabled or dies in their 30s or 40s. Americans face more economic risk in our lives now than at any point in decades; it seems crazy to me that the President wants to shift even more risk onto individuals and families.