The Morphing Of Entitlement Programs

Everyone today in general conversation about Social Security will almost inevitably refer to it as a retirement program or a retirement savings.  This is usually coupled with the concerns about the solvency of the program.   Those concerns are very legitimate.  It is so often referred to as a Trust Fund when it fact it is no such thing.  Remember Gore when he campaigned talking about locking the “box” with those funds and throwing away the key until it was needed.  Pure balderdash.  It never has been a repository of monies collected and then segregated and kept only for  the purpose of paying benefits due to recipients under the program.   Those dollars you pay in today are immediately drained right out of the fund and used by the government to pay its current bills for every one of those bureaucrats that make an average of 67K per year plus benefits and all the other expenses of government.  As the government draws out the money it merely replaces those monies with IOU’s issued from the government.  It is nothing more than a vague promise the government will pay the monies when they come due.    Because of the debt and the deficits and the prospects for a weak economy for years the concerns about the worth and value of that promise are legitimate.

Everyone must be reminded that the SS program was never intended to be a retirement funding program.  It was set up during the Depression to assure that the old folks would not have to go to the Poor House when they got old.  It was to be a minimal payment so their basics needs could be met without them being an undue burden on their family.  In those days it was assumed the old folks would probably be living with their extended family when that got old.   It was designed to keep the old folks off the streets.  It was never intended to supply enough money to for someone to “retire” on and live more or less like they did when they were working.   It assumed a lower standard of living.  When it was implemented in the ’30’s there were about 30 workers for every beneficiary.  Also remember that the actuaries had run the numbers just like those evil old life insurance actuaries and it was known that the average life span then was 62 and the benefits even then were not going to begin to pay out until age 65.   The government assumed there would be lots of people who paid in but would never receive one dime of benefits because they would be dead before they could collect anything.

As the years went by the program got redefined, not in law, but around the edges enough that we reached the point that it was viewed as a retirement plan.  The politicians began promising as only they can that the program was so everyone could retire on their social security.  The benefits increased and the age limit for receiving benefits was also lowered.  At the same time, decade by decade, the number of workers paying into the system declined per recipient.   Today we have only about 3 payers for each beneficiary under the program.  The Democrats viewed it as a sure vote getter over the decades to incrementally increase the benefits and they were mostly right.  They caused the COLA increases to become part of the regular payment program and thus another entitlement feature of the system.  The problem was and is that the COLA was set up so that it did not just keep pace with inflation but actually exceeded it by a percentage point and a half.   Those little increases add up to huge numbers when you are talking about millions of people.  We needed a COLA adjustment because of the inflation under Carter but did it have to exceed the actual inflation rate?

Every time the politicians in power think they need a little extra boost at the polls it is like a moth to the fire and they can’t resist adding a little extra here and there to convince the recipients to vote for them and they will get a few more goodies for that vote.  Entitlement programs always grow and always will as long as we have politicians.  You can bet the ranch on that one.  It is a characteristic in the genes of the political class.    If Social Security was a true trust fund we should all  be getting interest on our money we pay into the system, even if it was only 2% and when you died earlier than when all your money had been paid to you the excess should be paid in a lump sum to your estate or heirs.  If it is a trust fund it is your money, not the government’s.

The average life expectancy today is around 78.  We need to stair step the retirement age upward over a period of couple of decades.  Take it up to 70 over 20 years and the savings would be huge.  If the young people now knew what to expect they would have years to plan their lives accordingly.  Those already receiving benefits should get what they were promised.  At the same time eliminate that early retirement age of 62 completely.  The “early” retirement age should be adjusted upward to 65 at a minimum.  Yeah, lots of folks will complain that is not the deal they were promised and that is true.  But that new promise would probably have a lot more worth and credibility than those IOU’s being issued to the SS every year by the government.  I would rather have that new promise if I was 25 today than the one that exist at the moment.

“The united voice of millions cannot lend the smallest foundation to falsehood.”–Goldsmith


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Filed under business, Economics, government, Politics

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