First of two columns
NOT BEING A POLITICIAN, I can say anything I like about Social Security -- even the truth. And the truth is that Social Security is an immense Ponzi scheme that is slowly bankrupting young Americans in order to enrich their elders. The truth is that people in my age group -- under 40 -- will never get back in retirement benefits what we are paying in Social Security taxes, while those now retired are collecting far more than they (and their employers) ever contributed, interest included.
The truth is that Social Security is the single largest item in the federal budget -- billions of dollars bigger than national defense, for example. Military costs have fallen sharply, but Social Security has gone through the roof. (Average monthly benefit to a retired couple in 1970: $199. In 1990: $1,027.) And as huge a drain as Social Security is now, it is nothing compared with what's coming. When the first baby boomers retire in 2008, all fiscal hell will really break loose.
Eleven years ago, Congress and the Reagan administration passed legislation to "save" Social Security, mostly by jacking up payroll taxes. At the time, Robert Myers, the longtime chief actuary of the Social Security Administration, crowed that the retirement fund had been fixed until "at least" 2060. We should be so lucky. The date has since been repeatedly moved forward, most recently in April. Officials now expect bankruptcy to occur in 2029.
The clock ticks. But politicians, too scared to touch the dread "third rail" of US politics -- or to provoke the most ravenous piranha in the capital tank, the American Association of Retired Persons -- do nothing.
In February, President Clinton charged the Bipartisan Commission on Entitlement and Tax Reform with recommending ways to curb the costs of Social Security, Medicare and other budgetary black holes. Ten months and $1.8 million later, the commission voted to recommend nothing. Its chairmen, Democratic Sen. Bob Kerrey of Nebraska and Republican Sen. John Danforth of Missouri, had proposed a host of suggestions, including raising the retirement age, reducing benefits to affluent retirees, and allowing workers to invest their payroll taxes in private retirement funds. They couldn't win support for any of them.
This cowardice permeates Washington. Clinton's chief of staff has warned that the president will oppose any cut in Social Security spending. GOP leader Newt Gingrich, unafraid to take bold positions on lesser issues, toes the AARP line on this one. For the foreseeable future, he said recently, Republicans intend to give Social Security a good leaving alone.
Sooner or later, someone will have to muster the testosterone (or the estrogen) to face down the senior-citizen lobby. Already, 35 percent of the US budget is being spent on Americans 65 and over, who make up only 12.5 percent of the population. If they were also the neediest 12.5 percent, this disparity might make sense, but senior citizens are less likely to be poor than any other age group in America. Only 6 percent of families headed by a senior citizen live below the poverty line. For families headed by people in their mid-20s to mid-30s, by contrast, the figure is considerably higher: 16 percent.
Once, Americans over 65 were the poorest age group in US society. Today they are the wealthiest. Each year, some $70 billion in Social Security and Medicare benefits goes to recipients with cash incomes above $50,000. Half of married couples over 65 have incomes of more than $35,000. The majority of seniors own their own homes -- mortgage-free.
Between 1967 and 1987, senior households enjoyed a 52.6 percent real increase in income. The income of everyone else went up just 7 percent. It is commonplace to point out that twenty- and thirty-somethings face a reduced standard of living, that they must work harder to acquire less and are not likely to enjoy the financial comforts their parents did. Left unsaid is a big part of the reason why: Under-40s are being made to subsidize their parents' -- and grandparents' -- peers, and are being gradually choked in the process.
Social Security taxes take the biggest bite out of younger people's earnings. Check your pay stub: If you're like 70 percent of your fellow working stiffs, you are paying more in Social Security "contributions" than in federal income tax. Social Security has turned into a system for enriching the elderly at the expense of their children and grandchildren.
Current retirees collect five to six times more from Social Security than they and their employers put in. A married worker (with a nonworking spouse) who paid the maximum Social Security tax and retired at age 65 on Jan. 1, 1986, would have gotten it all back, with interest, by Oct. 1, 1987. Since then, it's all been gravy. More precisely, welfare.
But the gravy train is slowing and will soon screech into reverse. Those of us still 25 or 35 years away from retirement will not recoup even what we pay in. And what we pay in, unless Social Security is reformed, will rise from 15.3 percent of our earnings now to 20, 30 or 40 percent in the decades ahead.
Social Security is like all pyramid scams. Those who get in early make out like bandits. Those who join later -- unless the gyp is stopped -- get shafted.
(Jeff Jacoby is a columnist for The Boston Globe.)
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