Why Social Security reform affects us - now

Yale Daily News ^ | March 31, 2005 | Jonathan Swanson

[FreeKeys]

More young Americans believe in the existence of UFOs than the future existence of Social Security. But in spite of our generation's deep skepticism, we've been left out of the national debate. Ostensible concern for our generation is invoked incessantly under the hackneyed banner of "for our children and grandchildren," but the opinions of these very people are nowhere to be seen on the national stage. Students for Saving Social Security is beginning to fill this void. Social Security reform concerns our generation more than any other, and it concerns us now: When we graduate, our jobs and salaries will be on the line.

As college students, we are preparing to enter the workplace, where we will begin our contributions to Social Security. Our very first paychecks will be siphoned into a system that cannot fulfill its promises to us. But our payroll taxes are being saved by the government for us until we retire, right? Wrong: All payroll taxes have already been spent. But we have a legal right to our retirement benefits, right? Wrong: The Supreme Court has ruled that Congress has no legal obligation to pay us back. And that is in fact what will happen without reform. Based on current projections by the Social Security Administration, we can expect the government to be able to afford to keep its promise to two out of every three of us. It's no wonder the late Sen. Daniel Patrick Moynihan (D-N.Y.) described Social Security as "outright thievery" from our generation.

True, most young Americans find Social Security nauseatingly complicated and tedious and have made little effort to voice their interests. And many opponents of reform hope that we will remain silent because we will consider our retirement too distant to concern us. But Social Security reform is not merely a distant crisis concerning our retirement. Social Security reform affects many issues of vital, and immediate, importance to us: the ability of employers to hire us as we graduate, our opportunity to save for our future and the economic growth and prosperity of our country in the years ahead.

Increasing payroll taxes to cover Social Security's future shortfall, as some members of both parties have advocated, will burden employers with additional costs and fetter their ability to hire us as we graduate. And for those of us who do find employment, our salaries will be smaller, handicapping our ability to save for our future. This is not simply abstract theory or inveterate pessimism -- this is an economic reality. And it is a reality many young workers experience outside the United States right now. Just look across the Atlantic to the two largest economies in Europe: France and Germany are both saddled with the burdens of un-reformed retirement systems ill-suited for the rising generation. France just reported an unemployment rate over 10 percent. Germany's economy shrank 0.2 percent in the last quarter. Only a few decades separate us from Europe.

But declining employment and salaries and an anemic economy need not be the fate of our generation. Genuine reform of Social Security, by curbing the growth of promised benefits and by introducing personal accounts, will increase national savings by billions of dollars each year, spurring significant increases in national investment, productivity, wages and jobs. Harvard economist Martin Feldstein estimates that Social Security reform would add $10-$20 trillion to our economy, something that would create at least a million new jobs for us as we enter the workforce and increase our incomes by $5,000 for a family of four.

Social Security reform presents a prodigious opportunity to save our generation from economic debility. Ownership of personal accounts means personal property will replace government promises, and retirement will be secure for generations to come. Without personal accounts, benefits must be cut by over 25 percent or payroll taxes increased by 50 percent.

Seizing this opportunity, however, requires immediate action. The longer we wait, the more difficult reform becomes. Alan Greenspan has repeatedly called for reform sooner rather than later. And former President Clinton said many years ago that "We all know a demographic crisis is looming. If we act now it will be easier and less painful than if we wait until later." But in the face of such an opportunity, many in Congress are stalling. Congressman Rob Simmons (R-Conn.) has opposed reform because he'll "be dead by then" when the crisis strikes. Our generation shouldn't be amused. Such delay will directly hurt our generation more than any other.

Politicians know that an entire generation of young voters will be politically molded by an issue with such extensive and extended effects. Securing our future will be rewarded; profligacy and delay will not. With genuine reform and personal ownership, Social Security can offer our generation a secure future, not just pie-in-the-sky promises as illusory as UFOs.

[FreeKeys]

Jonathan Swanson, a junior in Davenport College, is co-founder of Students for Saving Social Security (www.secureourfuture.org), a grass-roots campus network advocating reform through personal ownership.

On his blog Friday, Don Luskin wrote: "A YOUNG GIANT STARTS TO WAKE UP At last! The people who have the most to gain from modernizing Social Security [at http://www.secureourfuture.org/index.htm ] -- the young -- are getting organized to support reform. Meet Students for Saving Social Security, a network of activists on dozens of campuses. It's headed up by Jonathan Swanson at Yale ... We'll be watching Swanson and this organization eagerly. Stay tuned..." -- at http://snipurl.com/dt2g

[henderson field]

Why do the politicians keep stealing the SS money and why does the MSM not call them on it?

[FreeKeys]

Clickable:

http://www.secureourfuture.org/index.htm

http://snipurl.com/dt2g

[Huck]

curbing the growth of promised benefits

All that blabber just to say he favors cutting benefits over raising taxes. Of course he does.

[Huck]

A YOUNG GIANT STARTS TO WAKE UP At last

Yawn. Yeah, right.

[FreeKeys]

Why do the politicians keep stealing the SS money and why does the MSM not call them on it?

"Many people are unaware that the money that is taken out of their paychecks for Social Security is not -- repeat, not -- being put aside to pay for their retirement. That money is paying for people who are retired right now, and anything that is left over is being spent by politicians in Washington for anything from farm subsidies to Congressional junkets. ... Liberals are desperate to keep Social Security the way it is, because that means they can keep spending your money as they see fit and keep you dependent on them. That's what the welfare state is all about." -- Thomas Sowell, HERE.

Also see: Observations on Politicans and Observations on Journalists

[Brandonmark]

Good post...it is the students that need to get engaged in the discussion. Another organization dealing with multi-generational advocacy is Generations Together http://www.generationstogether.net/index.aspx

[FreeKeys]

PING ! 
(23.2KB)

I know you care about this:

The rare youth wakes up to the impending disaster of slowly developing national bankruptcy.

"Private accounts and reduced benefits are the only way out of this one, folks. To make the program truly solvent, the government would have to confiscate so much wealth it would destroy the economy. Maybe the Congress will make the right choice and fix the problem. I doubt it." -- Neal Boortz, HERE.

"If added to the rates needed for Social Security, the implied payroll tax rate necessary to cover the future costs of both Social Security and Medicare would be 32 percent in 2040 and 44 percent in 2075." -- The Concord Coalition

[FreeKeys]

...it is the students that need to get engaged in the discussion. Another organization dealing with multi-generational advocacy is Generations Together http://www.generationstogether.net/index.aspx

Excellent site! Thanks for the heads-up!

[ex-snook]

"More young Americans believe in the existence of UFOs than the future existence of Social Security."

Obviously they have been brainwashed. If there is a projected future shortfall in money, taking money out of the system is not the solution.

[SC Swamp Fox]

As college students, we are preparing to enter the workplace, where we will begin our contributions to Social Security. Our very first paychecks will be siphoned into a system that cannot fulfill its promises to us.

My stepson took exception to the future tense of this paragraph. He has had a job since he was sixteen and is working his way through college delivering pizzas.

The first time we prepared his tax return, he was surprised and a bit angry when he realized that "FICA" was not considered part of his federal tax withholding and he was not going to be getting it back.....ever.

[EGPWS]

Why do the politicians keep stealing the SS money and why does the MSM not call them on it?

That would be like Italy stealing the roar of the third Reich during WWII.

[EGPWS]

"Private accounts and reduced benefits are the only way out of this one, folks.

Oh, so true FK!

Now it is the job of Carl Rove and Company to come up with a political agenda to stifle the fear mongering of the DNC.

[SC Swamp Fox]

If there is a projected future shortfall in money, taking money out of the system is not the solution.

Allowing for "personal investment accounts" within SS would not necessarily remove money from the system. It would prevent congress from simply taking the SS surplus and "investing" it in Government Bonds which allows them to spend it.

[kabar]

All that blabber just to say he favors cutting benefits over raising taxes. Of course he does.

You missed the point completely. The kid gets it. Benefits are going to be cut regardless. Raising taxes will only delay the demise of the system. SS is a pay as you go system. Demographics will dictate what happens. Personal accounts coupled with a decrease in benefits will keep the safety net in place and give the young an opportuntiy to create wealth and save. It will also have a salutary effect on the nation's economy.

[camas]

changing SS is really a tax cut and the MSM would never go for a tax cut.

[cgbg]

Benefits are going to be cut regardless. Raising taxes will only delay the demise of the system. SS is a pay as you go system. Demographics will dictate what happens. Personal accounts coupled with a decrease in benefits will keep the safety net in place and give the young an opportunity to create wealth and save. It will also have a salutary effect on the nation's economy

While everything you say here is correct you haven't taken your thought to its logical conclusion.

Massive social welfare programs like Social Security end only one way--with a bankrupt country. We will get to watch it in Europe before it happens here.

My pessimistic view is that the debate over Social Security is just discussing rearranging deck chairs on the Titanic. America (both political parties) have chosen socialism, and over the next couple of decades will face the consequences.

[kabar]

Obviously they have been brainwashed. If there is a projected future shortfall in money, taking money out of the system is not the solution.

It sounds like you are the one who has been brainwashed. Taking money "out" and placing it under the control of the individual and not the government along with a reduction in defined benefits will make the system solvent in the long run. It decreases future USG liabilities. As the system is currently structured, the USG can change the benefits and tax rates at any time as they did in 1983 when the increased the retirement age and linked the cap to the CPI.

The SSTF is filled with IOUS (non-marketable Treasury Bonds) and represents an unfunded liability. In 1935 SS had more than 40 workers to every retiree, in 1950 it declined to 16. Today it is 3.3 workers and in 2030 it will be 2. SS is a Ponzi scheme.

SS is a pay as you go system. We should do away with the facade of the SSTF and make SS a line item in the Federal budget the same way we handle Medicare B. In any event, status quo is not an option.

[LS]

My students all "get it." The trouble is, while they get it intellectually, they aren't fired up about it in a political sense the way the AARPies are. Still, I think long-term we win this one.

This program was a disaster from the get-go. See our book, "A Patriot's History of the United States." We demolish this.

[kabar]

Massive social welfare programs like Social Security end only one way--with a bankrupt country. We will get to watch it in Europe before it happens here.

There is no doubt that the entitlement programs need to be reined in. Medicare is in far worse shape than SS by a magnitude of three to four times. We can still have the defined benefit portion of SS as a safety net, which will include survivor and disability benefits. Personal accounts coupled with a reduction in current benefits will solve the solvency problem permanently and give individuals ownership over their money and a better return, which more than compensate for the reduction of defined benefits.

Eventually, partial privatization will lead to full privatization for the retirement portion of plan. Countries like Chile and the UK have moved in that direction. Germany and France will not go bankrupt, they will just be forced to cut old benefits. This is happening right now in Germany. My 85 year old mother-in-law is having her benefits cut.

I too blame both parties and Congress for not telling the public the truth. SS has been a cash cow for the USG. When the surpluses start declining in 2008 and SS goes in the red 2018, Congress will be forced to act as they were in 1983. My fear is that Congress will continue to kick the can down the road with short term fixes like increasing the retirement age, FICA tax increases, and lifting the cap rather than going to a permanent fix.