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Social Security and the Boomer Problem


Politicians like to talk about the so-called gray tsunami – a doubling of the elderly population caused by the aging children of the Post-World War II baby boom – as if it is an asteroid just discovered to be hurling toward Earth at breakneck speed. In actuality, our aging population and the strain it will put on our economic resources was an entirely foreseeable crisis.

Unfortunately, our so-called leaders lacked the political courage to confront the issues when the solutions would have been least painful and instead just kept on pushing the problem down the road. Therefore, it shouldn't be a surprise that younger generations are scoffing at the notion that they should pick up the enormous tab that such ineptitude has created.

Despite all of the misguided and self-serving rhetoric, the biggest instigator to today's budgetary mess were the artificially low tax rates of recent decades, which disproportionately benefited a very small sliver of the population, while helping to foster historic economic inequities. Rather than prepare for the demographic changes we knew we would experience by resetting expectations, while putting aside the additional revenues to fund future obligations, Washington did the exact opposite.

In today's entitlement debate, I've heard many references to the so-called “Reagan-era Social Security reforms,” but I've yet to hear anyone in the mainstream media challenge the idea that the manner in which they are referenced is pure revisionist history. In 1983, new legislation required that both the tax rate and the amount of income subject to Social Security taxes would be increased over time. This was ostensibly to put money aside which would be needed later, particularly for the nearly 80 million retiring boomers on the horizon. We essentially began overpaying Social Security by billions of dollars each year, only to have that money moved "off the books" in order to hide deficits being incurred by financing things the government couldn't afford and weren't willing to ask taxpayers for. 

Over decades, this little accounting trick helped allowed us to cut taxes over and over (especially on our wealthiest citizens) and fund all kinds of legal and illegal foreign misadventures, while never having to dispense the pain on current voters. Social Security, the most successful insurance program of all time, was turned into a giant piggy bank, raided by Washington special interests and stuffed with nearly $3 trillion in IOU's. It's still not bankrupt mind you, not even close. That's more hyperbole aimed at convincing people it's too far gone to save or needs to be scaled down to a fraction of its current scope. 

It does, however, need to be fixed and on that front, we are being sold the same old tired solutions. In other words, leave those in and approaching retirement alone and simply raise the age and lower the benefits for those who will ultimately pay the bulk of the tab for the whole pyramid scheme – today's youth. I'm sorry, but as we say here in the South, that dog don't hunt. If the simplest solutions for repairing Social Security – scrapping the cap on taxable income and means testing recipients – aren't on the table, then why should Gen X'ers and millennials be asked to not only inherit the trillions of dollars in debt that propped up the program for current retirees, but receive less themselves as well?

The myth that the program was built in an era when people rarely lived long enough to receive more than a year or two worth of benefits, while today's youth live something like 15 years longer, has hopefully been largely dispelled. In reality, even the much more modest gains in life expectancy since 1935 (the year Social Security began) are heavily skewed by what had been a high death rate for childhood diseases and women giving birth. Today, those who make it to 65 live only 4 years longer than those who did so in 1935 – and even that gain is disproportionately enjoyed by those at higher wealth levels, who benefit from a number of longevity-related advantages, including the most obvious: infinitely better access to high-quality health care.

Full benefit age for Social Security retirement has already been raised to 67 for those born after 1960. In spite of that, we still hear much more talk of raising it to 70 and eventually 75 than we do of taxing all income, rather than stopping after the first $113,700 each year, as we do now, or even means testing benefits to limit them to those who truly need what was designed to be an anti-poverty program – both of which would shore up the program into the next century.

Otherwise, if there are going to be benefit changes, why shouldn't we all suffer them at once? Politicians will give you a line about keeping promises to those who have paid in and planned their retirement, but in truth, they are simply afraid of an organized and active voting bloc with a collective record of voting in favor their own self-interest, rather than society's. I'm under 40 and have been paying into Social Security for 25 years. Wasn't there an implicit promise made to me as well?

Younger generations are also beginning to see that despite the stereotype of all seniors barely treading water on small fixed incomes, the majority of today's elderly enjoy a far higher standard of living than young people today are likely to, thanks to the demise of unions, the off-shoring of middle-class jobs, the inability to rein in the costs of education and health care, and mountains of debt which allowed previous generations to keep enjoying maximum services at minimum tax rates. Also, the days of selling your $20,000 tract home in a Boston suburb for $800k when you retire, or supplementing your pension with the generous employee stock you received, which has since split umpteen times, are also unlikely to be seen again, here or anywhere else.

Boomers might kid themselves into believing that they simply worked harder and deserve their relative comfort, at least more than today's young people that they are prone to rail against. But if they were to examine the issue honestly, most would see that they are the generational equivalent of someone who has mistaken being born on third base with having hit a triple. The post World-War II economy, in which the colonial powers of Western Europe were decimated and American workers were shielded from 2/3 of the world's cheap labor by the Iron and Bamboo Curtains, spawned a dynamic that can never be recreated, while its benefits were largely squandered on the here and now that has left us high and dry, looking for a bailout from the kids on deck.

My point is not to rag on the baby boomers, but to defend the young Americans whose interest are most likely to be sold out, just so that their parents and grandparents might be kept in the lifestyle to which they've grown accustomed. The U.S. economy has grown almost exponentially since 1935, but while worker productivity has also been on a nearly inverted climb, workers have shared very little in those gains. Should the advancement of four more golden years be rewarded by working eight years longer to reach retirement in the wealthiest society in the history of the world? And if so, what praytell will they be doing at age 73? We can't all be greeters at Walmart.

Like I said, there are simple solutions to the so-called "entitlement problem" and they all involve asking a small group of Americans who would be least impacted – and have also benefited most from the mismanagement of our collective wealth over the last three decades – to make some relatively small and patriotic sacrifices, so that future generations might be left with something even approaching the society that has benefited them so much. I only hope we can find the collective will to demand an equitable solution to a wholly solvable problem.


The Great Big, Fat Lie About Social Security

Published Sunday, February 6, 2011 3:00 am


Dennis Maley's column appears every Thursday and Sunday in The Bradenton Times. He can be reached at dennis.maley@thebradentontimes.com. Click here to visit his column archive. Click here to go to his bio page. You can also follow Dennis on Facebook.


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