Happy Sweet 73

Social Security has survived another year. In at least one important policy area, good sense has triumphed over ideology. We have not shredded the safety net in a celebration of rugged individualism. We have not promised to transfer resources from the poor to the rich, from women to men, from the old to the young.

In a curiously American drama, “liberal” commitment to tried and true policy has beaten back the “conservative” drive for radical change. We can only hope that this liberal caution will mark the next president’s policy not only toward Social Security but toward taxation, spending, and military adventures as well.

True, the future of Social Security is clouded by more than the ideological wish by some to return to the policies of the Herbert Hoover era. Forecasting the system’s revenues and likely benefits over the next 75 years, the actuaries of the Social Security system estimate that in about 33 years, resources will become insufficient to cover all promises. This is due mainly to our “bad luck” of rising life expectancy. Our population is aging so in a generation or so, we will need a little more for the safety net. But Social Security is hardly in crisis.

• Without any special appropriations or rescue packages, Social Security can be expected to meet all its commitments until close to mid-century.
• With modest adjustments to the payroll tax, Social Security coverage, retirement age, and other   tweaks, this period of financial security can be extended to the end of the 21^st century. 

Our financial projections become more and more uncertain the farther into the future we extend them. Even though the system is not yet 75 years old, the Trustees of Social Security report every year what the financial outlook is for the next 75 years. If you think it is hard to predict whether wage growth and immigration will be higher in 2010 than in 2008, try predicting these variables for 2018, or 2081. Who could have predicted accurately in 1935 the economy of 2008?

Social Security is something of a bureaucratic miracle; it is good government, getting the job done. At a cost vastly lower than the cost of running a private insurance company or bank, the Social Security system tracks 197 million accounts, delivers checks on time every month to more than 49 million beneficiaries. Like a rock in the wild sea of economic change and uncertainty, Social Security stands prepared to anchor the lives of the old, the disabled, and families whose breadwinner has died.

Happy Birthday Social Security.

Comments

[Richard VandenBrul,Livonia/USA]

Yea for Social Security.

My first check should arrive next week.

Thank You USA workers.

[Nick Smith]

I agree with all but one comment you made. Social security is not "good government". I have been oc SS for 4 months and they are trying to take it away from me because they put a decimal place wrong and say that I am making $95,000.00 a year instead of $9,500.00 a year. When you are on the receiving end of one of their snafus it doesn't feel like good government. and ps. they are very rude about it when you try to call them.

[Nick Smith]

I agree with all but one comment you made. Social security is not "good government". I have been oc SS for 4 months and they are trying to take it away from me because they put a decimal place wrong and say that I am making $95,000.00 a year instead of $9,500.00 a year. When you are on the receiving end of one of their snafus it doesn't feel like good government. and ps. they are very rude about it when you try to call them.

[Dan]

I read your blog post about how its a good thing the Social Security system is not privatized. Did you happen to notice one of componets of the Bernard Wasow column you cited in your blog called for improving, "the return on Social Security funds by investing part of them in equities, as just about all other public and private pension plans do". The experts you sight in your blog suggest one of the "tweaks" needed to fix social security is to follow the example of the, "Federal Reserve Board, the Federal Railroad Retirement Board, and the Tennessee Valley Authority" and "invest directly in stocks".

Are you sure you don't think privitaization doesn't have some roll in efforts to revamp/reform Social Security? The experts you cite seem to think it is.

[Dan]

I read your blog post about how its a good thing the Social Security system is not privatized. Did you happen to notice one of componets of the Bernard Wasow column you cited in your blog called for improving, "the return on Social Security funds by investing part of them in equities, as just about all other public and private pension plans do". The experts you sight in your blog suggest one of the "tweaks" needed to fix social security is to follow the example of the, "Federal Reserve Board, the Federal Railroad Retirement Board, and the Tennessee Valley Authority" and "invest directly in stocks".

Are you sure you don't think privitaization doesn't have some roll in efforts to revamp/reform Social Security? The experts you cite seem to think it is.

[Bernard Wasow]

"Privatization" refers to the process of shifting the risk of adverse (as well as good) outcomes in financial markets and price movements to workers and retirees instead of keeping the social insurance of guaranteed, inflation-corrected benefits. The term never has been used to refer to inclusion of private assets in the SS Trust Funds. Ball and others who advocate inclusion of some equities never suggest that SS benefits should be made contingent on the performance of equity markets. The issue is not the composition of SS trust fund assets but rather whether the safety net guarantees an adequate minimum retirement income.

Bush's partial privatization, for example, proposed to reduce guaranteed retirement income, replacing it by the outcome of private asset markets. Ball proposes to keep the guarantee and to finance it in part through the return on some assets besides Treasury Bonds. If equities do better or worse than expected over some period, that is an issue for the SS Administration, not individual workers and retirees.

Of course, individual workers ought to supplement their SS guaranteed income with their own private saving, as SS benefits are quite modest.

Again, the privatization issue centers on whether the safety net, minimum retirement income should be guaranteed, not with the composition of the Trust Funds' asset portfolio.