Expand Social Security!

Duncan Black keeps killing it on Social Security in USA Today:

Some people who have objected to my proposal for increasing Social Security retirement benefits have done so on the basis that this is something people should be personally responsible for. Essentially, life’s a big test, and one element of that test is a lifelong commitment to amassing significant personal wealth that can be drawn down in your twilight years. If you fail, well, better luck next time. Except …

But there’s no need for retirement income to be in this special category of things we must be personally responsible for. We are not personally responsible for many things in our lives. I didn’t build the roads I drive on, or purchase the buses that stop regularly on my corner. I have little to do with the hiring and management of police and fire personnel or air traffic controllers.

Our hopefully somewhat democratically accountable governments provide many things for us. There are economic arguments about the areas where government should be more or less involved generally and ideological disagreements about the appropriate role for government. There will probably always be disagreement about just who should pay, and how. But there also practical arguments. If there’s broad political agreement on a particular outcome, such as that most people should expect to have a reasonably comfortable retirement, then the question is how best to achieve that. I don’t think 75-year-olds should face economic ruin and homelessness for any reason. I am not alone in that opinion. How do we ensure that?

Social Security was envisioned as one leg of a three-legged stool of retirement, along with employer pensions and private savings or insurance (though the metaphor itself was devised after its creation). The problem is that two of those legs have shrunk significantly. This is not a stool one can comfortably sit on. This is not a stool most people will be able to sit on at all. The system, as envisioned, is failing.

We can goad and cajole people into saving. We can provide incentives for people to save for their retirement, and penalize them for raiding those funds before they retire. We can subsidize employer contributions to retirement funds.

But we have been doing all of these things for decades, and they haven’t worked. The majority of people nearing retirement will not have sufficient funds to retire with anything resembling economic security and comfort.

Comments

  1. Dondla Dal Maso says:

    Jon, This post of yours allows me to mention, for your generation, an economic figure: 16.6%. According to economists, that is their best estimate (allowing for inflation) for the amount of household gross income that needs to be set aside starting NOW which, accruing over a lifetime, will secure a household adequate retirement income along with SS and Medicare. Some of the 16.6%, of course, can be set aside pre-taxation in IRA’s and related investments which means the Federal Government is giving a substantial tax subsidy to those monies. If a household member can become vested in a Union Pension so much the better. This all assumes that, before retirement, the household lives within its means and manages to avoid catastrophic events.

    You don’t need $10 million when you retire, and you can lead a prosperous life getting to retirement using simple common sense.

  2. John says:

    Well, at least you’re learning. Social Security was never designed as you think it was. It was and remains a safety net. Black is correct, it was a citizen’s responsibility to save for his own retirement through savings and pension (which he earned). SS was there if necessary.

    Now for more corrections:
    I didn’t build the roads I drive on – but I paid the taxes to fund them.

    I didn’t purchase the buses that stop regularly on my corner – but I paid the taxes that, along with the fares, paid for them.

    I have little to do with the hiring and management of police and fire personnel or air traffic controllers – but I pay the taxes that pay their salaries.

    I asked you a question awhile back – there is $12 trillion or so in personal retirement funds out there. Would you confiscate it in order to pay for this next entitlement? And would you ban individual retirement accounts, and force people to be dependent on the government for their retirements?

    So please stop with the “government does everything” line. It’s bullshit and offensive to all of us that pay taxes.

    • Jon Geeting says:

      Of course I wouldn’t want to confiscate personal retirement funds. It would be worth taking a hard look at whether some of the current tax-exempt savings options are working though. We should be encouraging individual savings, but there should also be a guarantee of a reasonably comfortable retirement at the end of life. The richest country the world has ever known can afford that. I’d pay for it by raising the payroll tax and raising (not eliminating) the cap on taxable earnings. Payroll tax is very visible and broad-based, and important to the politics of keeping Social Security untouchable.

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