In case you think Der Trihs is making this up, he’s not.
This is a long, comprehensive articlefrom the Wall Street Journal, too long to excerpt and do it justice. So here’s just one small quote from the middle:
Sound familiar?
If the Government were to pass a law where I could opt out of Social Security, getting back all of my contribution so far (even with no interest), and giving up any right to payments in the future, I would jump at that deal in a heartbeat. I can invest it better myself.
Heck, even if the deal did NOT involve getting back my contributions, I’d go for it. Just STOP taking money out of my check, and leave me out of the program. I’d be delighted.
Here is one recent proposal - not for abolishing it, but definitely fundamentally altering it.
Eisenhower warned that to try and do this would be political suicide, so I can’t imagine they’d actually do it.
Emphasis added. That’s factually incorrect. Everyone who works has money taken out of their paycheck for FICA. You could abolish SS and require everyone to invest that amount of money in something like an IRA or 401(k) type investment.
N.B.: We can argue about whether that’s a wise thing to do or not, but it is possible, contrary to what you claim.
Except they will soon control the government, are heavily into voter suppression & gerrymandering, and are true believers. They may well feel that it *won’t *be suicide for them as they’ll soon be able to make it basically impossible for non-supporters to vote, and are likely too fanatic to care about the consequences anyway.
But that’s not the discussion. I was responding to the notion of people voluntarily contributing to a savings program, which is laughable. What you’re suggesting is pretty much identical to SS (in that it’s mandated and would have to be enforced by the same people), so what would be the point of it?
No. You’re asking for money that doesn’t belong to you. Why should the government give you free money? See the link in post #8.
Let’s say you have auto insurance, and you’re paying $1,200 per per year (around the average rate in your ZIP code). You pay your premium for 30 years. Then one day you find you have enough money in the bank to cover the minimum legal liability amount required by law, and decide to opt out of auto insurance and put the funds in escrow as your insurance. You say to your insurance company, ‘I’ve paid you $36,000 for insurance over the years, and I’ve never made a claim. So I’m going to drop coverage and self-insure. Please send me my $36,000.’ They’re not going to do it. Your premiums pay for other drivers (plus overhead and profit) at the time you pay them. They’re not put into a piggy bank where you draw from them if you have a crash.
So the options are to keep paying into SS and get nothing when you retire, or to stop paying into SS and let current retirees fend for themselves. You don’t get to opt out and be given free money.
The critical difference is the doctrinal one. Note I’m not advocating for this; merely explaining it.
With current SS, it’s a legal and potentially sustainable (or not) pyramid scheme. What I pay in today is spent today on today’s old people. What somebody else pays in 20 years from now will be immediately spent on me then. The so-called SS trust fund is a relatively minor detail that doesn’t alter the doctrinal big picture.
With an enforced IRA/401K-like thingy I get out what I put in, plus accrued interest / dividends / growth. All transfers are between current me and future me. Future you will draw only on current you.
The doctrinal attractions of this to an arch anti-“socialist” are obvious. The drawbacks are equally obvious to anyone who understands that even low levels of natural income inequality leads to larger savings inequality leads to wildly divergent retirement outcomes. As you rightly point out.
The original SS program was close to “you get out equal to what you put in plus notional interest” but was still funded entirely by the “pay it forward” model: current taxes paid out immediately to current retirees. Since that time the original SS program has morphed to “pay out (much) better than put in” for low income people and vice versa for high income people. As well it’s had disability support features added.
Both those other features would still be socially needed, but in a system like a forced IRA/401K now there’s zero funding mechanism for that.
Beyond that is the transition problem. Everyone who paid in so far is counting on folks in later generations to keep up the intergenerational bargain. Meanwhile, whichever generation is chosen to begin the transition will either be paying twice: once for their elders and once for themselves. Or the elders will be left in the lurch. Either of those is a darn hard sell politically. At least in a democracy; there *are *alternatives once that requirement is relaxed. :dubious:
A gradual transition between doctrinal systems is possible, particularly if launched by good luck at the start of a 40+ year period of smooth upward prosperity for most. But it’d need to be a very, very gradual transition. Like 2 or 3 generations long. Which means the transition program must stay stable across many, many congresses and presidencies. Which seems … implausible.
No. First people didn’t retire if their health was still good and they didn’t have any assets: you quit working when your health went bad.
But basically family took care of the elderly for the substantial majority of elderly.
If it’s not the discussion, then you shouldn’t have made that false statement that I quoted. But even if we eliminate the mandatory part, you are still moving the goalposts from “would be able to” to “would be willing to”.
The reality is that anyone who is savvy enough to fund their own retirement solely through their own investment choices probably doesn’t need the extra 6.25% from their paycheck they’d gain if SS was abolished. If you’re a successful investor, the extra would just make for a slightly nicer and more comfortable retirement. But many people are not qualified or disciplined enough to save up the 10x or 20x their yearly income they’ll need for retirement. If they didn’t have SS deducted or they were forced to invest SS themselves, there is a very good chance they would make poor choices and not have nearly enough saved up.
Any sort of SS replacement would need to account for the fact that many people wouldn’t save enough and would likely become destitute unless they have some form of guaranteed income. Even if you’ve made good decisions, there’s always the chance you’ll outlive your retirement savings. If you’ve saved enough to last 20 years but you have the good fortune to need 40, the guaranteed income from SS will prevent you from becoming destitute.
Agree completely with your overall point.
Small quibble …
The 6.25% you mention is only half the SS tax. If SS evaporated next year there’s also the other 6.25% the employer (or self-employed individual) pays in. That money would be freed up too.
It could either be passed on to the employee (yeah right) or pocketed by the shareholders or upper management. IMO the real motivation behind many of the various “abolish SS proposals” is to plunder that lump of money. It’s a really big lump.
Only at first; the problem is that all the jobs moved to the cities as the industrial revolution progressed. The children followed the jobs and ended up living in apartments in densely populated urban areas while their aging parents stayed at home where they had had a prosperous life. Increasingly through the 20th century families were left with a difficult choice when their elderly parents got sick; either the children had to leave their higher paying jobs in the city and go back to the rural areas where jobs were scarce, or the parents had to abandon their devalued properties and move into the crowded city living conditions with their children. Many of the elderly did move to the cities to be supported by their children, but for some their just wasn’t room. How do you raise a family and take care of elderly parents when you live in a 2 room apartment in New York or Chicago?
The situation got even worse after WWII as women entered the workforce in greater percentages. As society and the economy evolved there were fewer family members left at home to take care of the elderly as you needed two incomes to raise a family. With fewer family members around to take care of ailing elderly parents, the government was forced to create Medicare in 60’s to fill the gap.
You may think all of this “creeping socialism” is due to progressives wanting to take from the rich and give to the poor or something, but it is actually driven by societal and economic evolution and the workforce needed to support our economy. This is why programs like Social Security and Medicare were created in every developing (i.e. industrialized) country around the world with similar timelines. The industrial economy demanded it.
Do you honestly think they’ll have any supporters left if they try it? :dubious:
Oh yes. Do you honestly think they won’t??
Yeah, the chance that the other 6.25% ends up in the employee’s paycheck is zero. At best there would be a phase out period over a few years where the employer makes contributions, but that would likely only last a short time. The employer contribution would certainly go away, leaving workers with only the 6.25% they currently have deducted.
Yes, their supporters are fanatics. There’s an old line, paraphrased from memory that “Many Americans would be happy living under a bridge eating a rat, as long by doing so they made sure that* the other guy* only had half a rat.”
I think that describes the Republicans and their supporters very well. These are the same people who are willing to collectively condemn themselves to an early death by opposing national health care, because they’d literally rather die than risk the government helping someone. They hate with a burning passion the idea of helping anyone, for any reason.
Social Security is an entirely different entity. Even the Tea Party was all “hands off my social security!!!” It’s an extremely popular and successful program, and the idea that they paid into it and now aren’t going to get what they’re owed – well, good luck whoever wants to tell them that.
