There’s Hope in the Numbers

I’m encouraged by the OWS grass roots movement to see today’s youth attack the major source of our current economic ills and a potential threat to their own futures.  It appears after all that many of them are not being overwhelmed by the snake oil sells pitches of Wall Street regarding their retirement concerns.

I like to check the polls over at every now and then just to get an idea which way the wind is blowing on various issues.  Some of the figures on Social Security caught my eye that were encouraging as they were weighted heavily in favor of   the trust fund by those who were polled.  But to listen to some, Social Security is a “monstrous lie”. (Yes, I’m talking to you Rick Perry)  Many others among conservative ranks think it’s a failure.  Yet overall, 72% of all those polled thought that such characterizations of this social safety net program were inaccurate.

Broken down into age groups we find that the older a person gets the more they feel such claims are not accurate with 84% of those 65 and older asserting this.  The surprising age group for me was the 18-34 age group who were polled.  This is the age group that people who make such “inaccurate” claims are seriously focused on, hoping to convince the younger generation that their payroll taxes are depriving them of funds they could better use elsewhere.  58% of these young people stated they thought such claims were wrong.

That’s a pretty wide margin with a generation who’s fearful that this minimum retirement benefit will not be there for them when their time comes to cash in on it.  Equally striking was another poll by the same people (CNN/ORC) two weeks later, where similar people were asked if they thought Social Security had been good or bad for them or had had no effect on them personally.  38% thought it had been good for them personally with just 12% saying it was bad, but half of those polled (50%) said it had no affect on them at all.

Now maybe I’m reading these numbers wrong, but even with the misinformation that’s coming from those people who want to siphon off the billions that go into the social security trust fund in to private investments that rely on the risky and often volatile stock market to generate funds, most young people are still secure with Social Security’s existence, if not its purpose. Apparently too, most people see the payroll tax deduction as something that is either good or that they are willing to tolerate for the benefit of their own generation or their parents and grandparents’ generation.

The notion put out there by people like Rick Perry that Social Security is a “ponzi scheme” has been around since the system came into existence in 1936 yet to this day that bogus comparison has not garnered any serious traction.  Why?  I see two factors coming into play here

First and foremost, because such a claim itself is a “monstrous lie”.  The ONLY similarity between Social Security and a ponzi scheme is that payouts depend on current investments.  Ponzi-scheme originators take those investments and spend them rather than investing them to secure assets for future payouts to investors.  Payroll taxes that cover Social Security payments have been invested, creating extra revenue, that allows the system to make reliable payments during any shortfalls periods that may occur.  True ponzi-schemes survive a few years at best.  Social Security has been solvent for 75 years as a reliable source of retirement funds for low income working people and a healthy supplement for those who have also been able to tuck some away in private retirement accounts like 401ks.


Secondly, the mood today towards special corporate interests is acutely aware that there are those who have and will continue to exploit the savings of people for their own personal gain.  Many young people may be leery as to whether Social Security will be there or not for them but they are at least equally leery of the promises made by private financial interests who usually support the notion that Social Security is a failure.  They are also acutely aware that the volatile, speculative stock market is no place for amateurs.  The Dow and NASDAQ have been all over the map in the last few years and many young people have watched their parents and grandparents’ retirement funds depreciate dramatically, some to the point where they have lost virtually everything they put away.

In a previous article I wrote on this topic I shared that Jared Bernstein, a senior fellow with the Center for Budget and Policy Priorities tells us that “Retirement security must be a goal of a civilized society in an advanced economy.  And in fact, this is the case in every advanced economy.  A guaranteed pension is essential to meeting that goal; private plans that depend on stock market returns can surely complement a basic guarantee, but they are simply not compatible with the goal of retirement security.

These polls are hopeful for my generation who once shared the same fears that today’s youth culture are experiencing about Social Security.  The prevailing wisdom though appears to be sustained too that this trust fund, though no plentiful resource to retire with all of our creature comforts being met, is an important entitlement program that needs to be continued.

Clearly we need to make some corrections with the system to accommodate the retiring baby boom generation today that I’m a part of along with the economic impact that has forced many to retire before age 65.  But transferring our 6.2% payroll tax entirely into a a stock market account is not a suitable substitute.  Equally erroneous and hurtful is the belief that we need to lower benefits and increase the age limit to offset projected problems with Social Security.

Currently the Social Security trust fund is capable of paying 100% of benefits until the year 2036.  If measures are not taken by then to correct estimated shortfalls from the current economic recession and our baby boom fallout, there will still be enough in the system to pay 75% of benefits through 2085.   Perhaps one of the simplest solutions to make this needed adjustment is to simply raise or even eliminate the income amount of $106,800 on which payroll taxes are taken from so that those in the higher income tax brackets can pay there fair share for this social benefit.  This increase won’t impact the vast majority of wage earners.

For those wage earners between the ages of 18 and 34 who are being tempted by the purveyors of Wall Street to dump Social Security, I would advise caution.  Your best plan of action is to do a combination of a private savings account in the form of a mutual fund  through your job or individually AND continued investments each pay check into the secure social security trust fund.  There are great expectations from contributing to a private source of retirement but there is greater security in the social security benefits that you pay into over the years.  Continue to support the system and encourage your representatives in Washington to insure its solvency and it WILL be there for you too.


A Warning to the Economic and Political Elites: Listen Now

Common Sense on Social Security 

12 Fixes for Social Security

5 myths about Social Security

6 responses to “There’s Hope in the Numbers

  1. I’ve been receiving Social Security for over two years now and think it’s a great program. A lot of my peers have seen their 401Ks take 50% nose-dives twice in the last decade. I’m all for keeping it risk-free and viable well into the future. Especially for my adult children.

    • I had to start collecting early Hansi after being laid off in late 2009. I became eligible for reduced payments at 62 at the beginning of this year.

      With these SS payments and a small amount I draw from a pretty healthy 401k I was able to build up over 18 years I bring in about the same as I did each month when I was working full time. Plus, I have a little part time job that keeps me active and provides pocket change to spend without hitting our savings account.

      I’m lucky though. I know many of my friends and other acquaintances were not so fortunate when they got laid off.

      • I think the biggest concern we probably both share Dr, Chuq is the rising cost of health care. Though I am on my wife’s policy with the school district, the cuts backs going on there is changing their insurance provider and we’ll be paying more because the policies will provide less coverage. All medicines will not be out of pocket until we meet our deductible

  2. My plan is to have my kids make billions and support me in a life style I need to be accustomed to……..

    Then again, some of the best laid plans……..

    Great Post LB!

    • I didn’t plan quite that extravagantly Charly. 😉

      But I did plant and nurture two seeds that would provide social security payments (into their payroll tax deductions) to cover me and my wife. Let’s hope they don’t get caught up in the privatization hyperbole.

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