Social Security Turned 68 on August 14!

August 18, 2003

On August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law, creating a publicly funded retirement program. Sixty-eight years later, Social Security has morphed into a system of many inequities that faces multi-trillion dollar deficits in the near future.

Michael Tanner, director of the Cato Institute's Project on Social Security Choice, marked Social Security's birthday with the following comments:

"As Social Security turns 68 years old, it is time to recognize that a program designed for the 1930s is no longer adequate for the 21st century. Americans are well aware that Social Security is facing a financial crisis. In just 15 years Social Security will begin to run a deficit, and, overall, the program faces a shortfall of more than $26 trillion. But Social Security's problems extend well beyond the program's finances.

"Even if the system's finances could somehow be repaired, younger workers would still receive a far-below-market rate of return. Moreover, the system has numerous inequities built into it, biases that penalize low-income workers, minorities, and workingwomen. Individuals do not own or control their retirement funds, and Social Security benefits are not inheritable, meaning that millions of low-income workers are prevented from accumulating and passing on wealth. It is time for the current Social Security system to go gently into retirement and for Americans to have a new, improved 21st century retirement program."

In a op-ed appearing in the Washington Times, James Martin, president of the 60 Plus Association urges his fellow seniors to support options for younger workers: primarily the option to contribute to personal retirement accounts. Excerpts of his special follow:

"I'm calling on all of my fellow seniors this Aug. 14 to dedicate their energies to the necessary task of updating the tattered federal retirement program. We need not do it for ourselves; we will be fine. No politician would be stupid enough to even try to deny us our due. They have seen the seniors lobby in action and they know better. But we do need to fix the program. We need to do it for our grandchildren.

"When our children—the 77 million baby boomers—start retiring…the system will plunge into the red, paying out more in benefits than it receives in taxes. By the time our grandchildren and their children reach retirement age, Social Security will only be a shadow of its former self, or a distant memory—unless we do something to fix it, and do it soon.

"What that something should be continues to be the subject of heated debate. With lower birth rates and longer life expectancies…the current system could only survive by increasing taxes, reducing benefits, raising the retirement age another few years [some have suggested 70]—or some combination of the three.

"What are the alternatives to the bitter medicine proposed by those who want to maintain the status quo by raising taxes or slashing benefits? The answer: We can reinvent Social Security. … Let's give our grandchildren—and future generations of U.S. workers—the right to set aside some of their Social Security taxes in personal investment accounts, like IRAs. Doing so would be voluntary. It would relieve some of the financial pressure on Social Security, since the obligations of the system would decline accordingly. Best of all, our grandchildren would be better off, because even modest investments will increase in value over time, while Social Security's ability to pay will decline.

"This Aug. 14, let's give our young people a present: our promise that we won't rest until the Social Security system is updated for the 21st century."

Gary M. Galles, a professor of economics at Pepperdine University, expressed similar sentiments in a Philadelphia Inquirer article, "Social Security Really Isn't All That Secure." He writes:

"[August 14] now acts as a focal point for assertions that we must preserve Social Security as is, particularly against reforms that would allow any privatization. But the falling number of workers per retiree as baby boomers retire…guarantees Social Security's insolvency in its present form…. Therefore, the status quo is not an option. Social Security as is cannot be saved.

"Defenders offer no real structural reform. They say relying on people's market choices to fund their retirement is just too risky to replace the safety of Social Security. While that is a highly questionable claim, what is seldom discussed is that Social Security is not the rock of security it is advertised to be.

"Social Security may not face any market risk, but relying on unenforceable political promises of retirement benefits is far riskier than relying on the legally enforceable contracts that back private retirement investments.

"Social Security's current promised benefits will be far from a sure thing decades from now. I would rather bear the risks of market volatility, minimized by prudent planning and diversification, than bet my golden years on future politicians honoring commitments made now by other politicians, when that will require them to raise taxes sharply."

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