TOUCHING THE THIRD RAIL: AN EXERCISE IN CIVIC VOLUNTARISM
Over the past year, the American public has been buffeted by proposals from members of Congress and “blue ribbon commissions” for fiscal reform and deficit reduction. Most such proposals include some combination of higher taxes and spending cuts, with Democrats emphasizing the former and Republicans the latter. On the spending side, most of the discussion has involved discretionary spending and the military budget. Thinking people recognize that something has to be done to address the fiscal hemorrhaging caused by the three “entitlement elephants” in the room: Medicare, Medicaid and Social Security. Having no political aspirations whatsoever, I want to discuss one aspect of the Greatest Untouchable: Social Security.
Politicians instinctively dread taking any position on how to improve or preserve Social Security. The American people, bless ‘em, really don’t want to hear about it – particularly the seniors and Baby Boomers who actually show up to vote. To the extent that the issue comes up at all, the cognoscenti cite the decreasing ratio of workers to Social Security recipients and the attendant need to raise the retirement age (again), cut benefits, or raise payroll taxes (again). But since many Americans are either unable or unwilling to save for retirement, the issue has to be faced.
Last week, I received my semiannual mailing from the Social Security Administration (SSA), containing certain useful information and tracking my personal contributions to the system since the first year of my employment. The envelope also contained a leaflet captioned “Thinking of Retiring?” Since my Pavlovian response to that question is “yes, sooner or later,” I actually read the thing.
In a nutshell, the leaflet posed certain options concerning retirement age, the consequences of working while receiving Social Security benefits, and when to apply for them. There were some actuarial statistics concerning the “graying of America.” A bar graph at the bottom of the front page showed the direct correlation between retirement age and the size of the monthly benefit: the younger the retiree, the smaller the benefit. The monthly difference in benefits between applying for Social Security at age 62 and at age 70 is currently $570, with $1000 per month being the median benefit payable to a worker who enters the system at the current “full retirement” age of 66.
What was left unsaid was that nobody forces us to accept Social Security benefits. Rather, the SSA highlighted how easy it is to apply for them. The government’s approach promotes the rise of the welfare state. People are conditioned to think that the system will always be there for them, although polls show that younger Americans are quite skeptical of the system’s long-range viability. I offer no nostrum for that, although I like the idea of private accounts. Rather, I start from “assuming the worst” about the fiscal condition of Social Security and ask whether there’s anything that people in my position can do to help out. The answer: self-denial.
That’s right, folks. When I hang up my spurs, I hope and expect to be in a position not to apply for, much less to collect, any Social Security benefits. We’ve saved and invested reasonably well over the years, and the income that our assets generate should be enough to sustain a reasonable lifestyle in retirement. Of course, that assumes that there will be no Weimar-style inflation or truly confiscatory tax rates. The result: a small saving for the system, but a contribution to its solvency nonetheless.
Imagine the “macro” effect if most similarly situated people did the same thing. Then we’d be discussing a genuine civic boon, helping the system survive for the benefit of our children and, more importantly, the less fortunate. I realize that this amounts to voluntary “means testing,” but voluntarism has always been the American way. Social Security will not be abolished, but it may wither away unless something is done. Isn’t this a good place to start?