Social Security has come under fire as of late. Texas Governor Rick Perry referred to the program as a “Ponzi scheme”, and other Republicans, including Congressman Paul Ryan, have jumped to defend his claim. Back in 2010, Michele Bachmann told a radio interviewer that Social Security was a “tremendous fraud“. The rhetoric doesn’t end there…but out of all these multifarious knocks on Social Security, the one of particular interest to me came from the folks over at Let Freedom Ring Blog (and when/if you guys read this, know that I pick on you only because you have one of the few Republican sites that I enjoy reading on a regular basis). They argue that:
Seniors currently collecting benefits or previous generations of seniors who collected benefits think it’s a positive thing. It’s equally understandable that graduates entering the workforce think it isn’t a good deal. They’re the people paying into a system that won’t guarantee an equitable return on investment.
It’d be surprising if 20-somethings thought that was a worthwhile investment.
While demographics shift from older generations to younger generations, the Democrats will be caught on the wrong side of this issue more frequently. It’s a shifting time bomb that eventually will explode in their face.
Now, as a 20-something who is about graduate and enter the workforce (3 months to go!), I feel pretty qualified to respond to this particular line of reasoning.
As I’ve written before, Social Security has helped provide safety for millions of Americans in the case of unemployment, injury, and old age. On its own, the program is estimated to keep roughly 40% of individuals over the age of 65 out of poverty. So to write this program off as a fraud is…well…it’s a bit of stretch to put it nicely.
What’s more, the notion that Social Security is some sort of trick to swindle young people out of their money has no basis in economic fact. A Ponzi scheme, for example, is predicated on the idea that eventually you’re going to run out of “suckers”. You lure people in with the promise of high investment returns, but instead of investing their money in productive products, you pay them off with money garnered by convincing more people to join the fund. Eventually, the scheme runs out of new investors and the whole system collapses. The only way that could ever happen with Social Security is if the nation suddenly stopped producing more young people (or if Republicans managed to completely gut the program).
Of course, Social Security has its problems, and I’ve written about those before as well. Despite its general success, the money being brought in is soon going to be insufficient to pay off all recipients in full (due in part to an increase in life expectancy-mostly for those at the top of the income distribution). However, we seem to have a completely skewed idea of the consequences of this shortfall. When the trust fund runs out, Social Security isn’t going to end. To quote Boston College Professor Alicia Munnell:
People talk about this 2029 date as if the whole Social Security system implodes in that year and nothing is left. This is one of the great misconceptions in the current debate-and it simply is not correct. Even if no changes were made on the tax or benefit side of the equation, current payroll taxes and benefit taxation would provide enough money to cover roughly 75 percent of benefits in the year 2040 and roughly 70 percent in the year 2075. Thus, even without further legislation, the Social Security system is not about to dry up.
So long as the government takes in revenue (read: always), we’ll still be able to pay out most of the promised benefits far into the future. Make no mistake; this isn’t an attempt to write off the problem. By allowing higher levels of income to qualify for the payroll tax and, perhaps, by making some cuts to benefits (and there is a Progressive way to do this; I’m potentially going to write about that later), the program can once again become a good investment for today’s young people (and by good, I mean one that offers a reasonable rate of return).
Social Security has long been a boon for widows, the unemployed, and the elderly. It’s not a “shifting time bomb” that’s going to blow up in Democrats faces. It’s a program that we’ve fought hard for, and we need to continue to do so. This inflammatory Republican language-fraud, Ponzi scheme-illustrates a total misunderstanding of Social Security and the good it does. So as a 20 something about to graduate college, I’m proud to say that I whole-heartedly support it. I hope you do too.