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Blog: The Truth about Social Security

Aug 17, 2011 | By Samuel Fubara

A passage from the Bible, the book of John 8:32, reads “And you will know the truth, and the truth will set you free. It is about time the American people were set free from the lies that inundate the facts about social security. It is about time that the myths concerning the best run Federal program were debunked.

The purely libertarian critique of social security is that it leads to government involvement in retirement investments. Social security is not an investment, it is insurance. It is insurance in the event of an inevitable event, retirement, and other unforeseen events, namely death and disability. Retirement investments already exist, they are called 401ks. Social security is the insurance the government mandates given that no level of human intelligence can predict the vacillations of investments. Moreover, because private firms are in the business of making profit, they will refuse to protect the most vulnerable in order to retain their profit margin. Even though private companies are inept at providing this sort of protection, the Federal government is able to do so at a fraction of what it would cost private firms.   

Social security is not welfare. The government taxes every worker, putting the contributions into a special account in the US Treasury, which is legally separate from every other part of the Federal budget. Payments come directly from this account to beneficiaries, who themselves contributed to the account during their time in the workforce.  Therefore, we should find any congressional suggestion that we cut benefits repugnant.

Admittedly, Social security is expected to experience a shortfall by the year 2025 given the retirement of many in the baby boomer generation. However, there are simple ways to avert this possibility: Increasing the payroll tax by a percentage point would significantly preclude the shortfall; raising the tax cap, to tax wages above $106000 would achieve the same end.  Some have suggested an increase in the retirement age given the purported increase in life expectancy. Unfortunately, paying close attention to the data shows that this increase in life expectancy has gone to high-income earners. Hence, an increase in the retirement age would have the effect of depriving most Americans of the rest they need after a lifetime’s contribution to the work force. The stress caused by a lengthened stay could lead to an even lower life expectancy among American retirees.

If the above suggestions are put into place social security will have enough of a surplus to reform its current mode of benefit calculation. The consumer price index used to calculate benefits for retirees is based on the expenses of all urban consumers. However, a more accurate consumer price index would be heavily weighed on the expenses of the elderly, such as medication, which are expenses that are not common to urban dwellers. Hence, the CPI-E should be used when calculating benefits for the elderly. Unfortunately, congress is yet to take these factors into consideration in its benefit calculation.     

In the debate around social security, all Americans have a moral obligation, to protect the elderly, the disabled and the orphans in society. We have a legal obligation to protect those who made contributions to social security during their time in the work force. Lastly, we have a practical obligation to protect the elderly, because old age is inevitable it is imperative that we set the right precedent for younger generations.