The Salvation of Social Security

Social Security remains sacred in American politics while it threatens the entire economy. In the recent election campaign, practically all the candidates promised to “preserve Social Security,” to “resist any cuts in benefits,” and to “protect the elderly poor.” No one dared to say that without major reforms—including “cuts”—the Social Security system will run huge deficits, that these deficits will push our children into a situation of economic stagnation and social conflict and create a potentially disastrous situation for the elderly of the future.

Politicians cannot hide a truth this important. When a recent national survey asked workers whether they felt they would end up receiving their Social Security benefits, 84 percent between the ages of eighteen and forty-four said no. Evidently many people sense that Social Security is in very serious trouble. Why do so many politicians pretend otherwise? They do so because they fear that the voters will punish messengers of bad news, and the future of Social Security is particularly bad news.

The elderly are bound to feel threatened, betrayed, and angry if politicians speak of taking away the one thing that has sustained many of them. At the same time, younger generations tend to see the elderly as far sicker and poorer, far more disabled and homeless than they really are. Younger people also believe the elderly are more dependent on their children than they are—or think they are. A recent survey, for example, found that people below the age of sixty-five estimated that about 30 percent of the aged receive income from their children. But in fact only 1 percent of old people—possibly fewer—receive their principal support from children or relatives; fewer than 5 percent receive any help that could be considered income; and the elderly are twice as likely to be providing financial help to children as to be receiving it.

Social Security benefits are obviously of special importance to the elderly poor. Reforms must be carefully structured to avoid harsh consequences for those who depend on the system. But most retirement benefits do not go to those below the poverty level. Social Security is in many ways a middle- and upper-income program; it has become a political sacred cow not because of a humane concern for the poor but because of a political reluctance to impose fiscal restraint on middle- and upper-income voters. Still, if such reforms are carried out soon, they need only involve a gradual reduction in the rate of increase of Social Security benefits, giving the current working population time to adjust, and providing—through expanded private savings and private pensions—the savings people need for their retirement and the savings the economy needs for its long-term health.

If Social Security is to be saved, the obfuscation that has served to hide the true problems of the system must give way to informed debate. Understanding is now blocked by a set of myths—fantasies, really—about how Social Security works, whom it benefits …

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