Not Broke… Just Without Money
Wow. It’s been awhile since we’ve had an opportunity to use the “Social Security” tag for a post, so for that much we should thank Bryant Math Professor Robert Muksian. However, once he moves beyond the calculation of benefits, into the reality of the program, his declaration that “Social Security is far from ‘broke'” should begin to spark “wait a minute” reactions:
It is the trust fund expanded by the Social Security Amendments of 1983 that is being depleted to the broke level. To quote the trustees of the Social Security Administration in their 2009 report, “Projected OASDI tax income will begin to fall short of outlays in 2016, and will be sufficient to finance 76 percent of scheduled annual benefits in 2037, after the combined OASDI Trust Fund is projected to be exhausted.”
You may recall several relevant factors, from that long-ago period when Social Security was actually a topic of conversation (in contrast to our current contentment to let it fester like an infected wound). For one thing, there is no actual money in the trust fund, only government IOUs. Come 2016, the feds will have to cut benefits, trim some other government spending, or raise taxes. That will no doubt spur a cordial debate at about the same time that cap’n’trade, auto efficiency standards, healthcare “reform,” and who knows what other policies begin to show their teeth. For another, the trajectory of Social Security is entirely in the wrong direction. When the government finishes paying off its IOUs to the trust fund in 2037, a perpetually shrinking workforce will be funding a larger retiree pool (especially if longevity continues to ratchet up).
As an investment, it far exceeds anything the average American, or perhaps even professional investors, could achieve over the lifetime of a retired worker.
Rather than impressing us, that fact should raise questions about the method. How could it be possible? Muksian touts the Social Security Administration as “the most efficient entity in the federal government,” but all it’s doing, at this point, is transferring money from younger workers to older workers and retirees. It doesn’t take much back-office acumen to accomplish that. Whether the supposed efficiency will continue when the SSA must begin demanding payment from the rest of the government and then when it runs out of money altogether is an open question.
Muksian tries to convince his fellow Americans to ramp up their investments in the scheme, with a mere 1% increase in the Social Security tax, to 7.2% of taxable wages. For those keeping score, that 1% of wages would represent a 16% increase in the tax. It is Muksian’s determination — on our behalf — that another four to five hundred dollars per year is “tolerable” given the benefits. In context, though, we should recall that we’ll be tolerating that confiscation of our earnings on top of the taxes that the government raises to pay for the money that it’s filched from the “trust fund” — not to mention the countless other drains on our income that the current administration and Congress are piling on our backs as a sort of investment derivative of labor yet to be performed.