Last weekend, I was in the midst of being told that Social Security was quite a government success. I remember thinking to myself that if SS is what counts as a success for the US government, it’s no wonder that President Obama thought Solydra was such a good idea.
Social Security, the biggest Ponzi scheme of all time, is finally catching up to that point where the calculus flips. For early “investors,” the Ponzi scheme works like a charm. As long as an ever growing base of donors props up the system, the checks still roll out on time and no one gets hurt. In this case, it took a mighty long time and a lot of big and little tweaks to the system before a prolonged recession tipped the equation.
One of the big, scary side-effects of prolonged high unemployment and lower labor participation is that the pool of donors has decreased and their “investments” aren’t keeping up with the demand for payout on the other side.
With that, here’s the happy thought of the day:
“For the early generations, it was an incredibly good deal,” said Andrew Biggs, a former deputy Social Security commissioner who is now a scholar at the American Enterprise Institute. “The government gave you free money and getting free money is popular.”
If you retired in 1960, you could expect to get back seven times more in benefits than you paid in Social Security taxes, and more if you were a low-income worker, as long you made it to age 78 for men and 81 for women.
As recently as 1985, workers at every income level could retire and expect to get more in benefits than they paid in Social Security taxes, though they didn’t do quite as well as their parents and grandparents.
Read the rest. But keep in mind that the “surplus” discussed in the article is illusory. It’s a big stack of government IOUs to itself that is called a “Social Security Trust Fund” but doesn’t actually contain any money. All it contains is the wobbly legal obligation of the US government to fund for the future– but not an obligation to fund to any specific level or under any specific circumstances. Essentially that money was loaned into the general funds for paying for other things and will now have to be paid back over time and we, the folks who paid into the system, have no specific claim to any of the money that we handed over. The enormity of that may not be obvious, but consider this: that surplus made our budget deficit look smaller every year and now, since the program can’t cover its own costs, it will make our budget deficit look even bigger. The changes that will be required to maintain the illusion of good stewardship of our retirement monies will likely make the deal even worse for upcoming generations.
What those IOUs really mean is that the government will have to borrow more and more from either general funds or from the Free Money Fairy; it also means likely increases in our taxes in some way to help make up for the shortfalls. It may be in bumps to retirement ages, expansion of the income that is taxed, or even a more straightforward bump in the tax rates along with those increased deficits– most likely a combination of a few of the above– but the one sure thing is that the deal has gotten worse and worse over time for workers entering the job market.
We’re asking our kids to fund our retirement with the near-certain knowledge that they will never be returned the equivalent of what they pay to keep us fat and happy in our old age. Merry Christmas, youngster, and get off my damned lawn.
If that has just stoked a little flame in you hungering for more Social Security fun, then read this Forbes article next. It’s a ray of sunshine in all of our lives.
Forget about “lockboxes” and other rhetorical devices used by politicians to perpetuate the unconstitutional falsehood that is Social Security, the unhappier reality is that the minute your employer withholds your Social Security taxes, the money is no longer yours. Deal with it.