We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
When Social Security was initiated by FDR as an effort to remove workers from the workforce to reduce politically-dangerous unemployment while virtuously cloaking it as "caring" for the old folks, politicians never publicly considered the long-term effect of that incentive.
Or did they?
Adding money to lower-, middle- and upper-class folks' retirement calculations helps incentivize them to quit being productive and to retire earlier while they are still able-bodied, paid for, as parasites, by a shrinking number of hard-working youngsters.
Politicians never think long-term (but, in the defence of those in the 1940s, folks in their 60s now are in far better shape that folks in their 60s then). Politicians think election, job, power, importance, ego, etc. But we know better: The Law of Incentive and the Law of Unintended Consequences are always in force. The Feds need an "Office of Consequences and Incentive" along with the "Office of the Budget."
Mankind is powerfully motivated by money, and that will never change. Money offers choices. Many have commented on Megan McArdle's fine piece on Social Security, but I will link this piece on her piece.
I believe Social Security should be income- and asset- balanced, but it will never happen. It's an entitlement now: another freebie on the backs of others.
Photo: Ida May Fuller, supposedly the first Social Security check recipient
The benefit of Social Security, which is hard to see amidst its disincentives, is that it's a long term (30 years) inflation adjusted annuity guaranteeing that you won't outlive your income, something the private sector cannot provide, owing to the uninsurability of inflation ; and that then gives you a definite age that you have to save for, namely to the allowed retirement age for benefits. The risk otherwise is living too long, with no way to save enough to cover that outlying case, but with no difficulty covering the average case.
It's easy to balance the budget, namely just raise the retirement age for benefits until it balances, following whatever the demographics do. If you want to retire earlier, do it on your own dime to bridge the gap betwen when you want and whenever benefits kick in.
McArdle seems unaware that that government must instantly return any funds collected to the economy, lest the money supply fall, either by spending it or by buying back government debt. Social security taxes are general funds exactly like any other, and must be spent.
Similarly, all citizens cannot save at once either, so privatizing social security isn't going to work any better. The particular mechanism would be too many people buying stocks now, and selling at once later, which drops the return on those investments. To what level? Enough to raise the retirement age so that the workers are willing to support the retirees, exactly the same as if the government had done it. Buyers has to equal sellers.
The problem that is unseen is that money is not wealth. Money is tickets in line to say when the economy does next, namely something for you. The Fed creates and destroys tickets to match what the economy is capable of doing at once. There's no point saving tickets if you're the government, since what can be circulating depends on the economy's capability at the time and not the supply of tickets you may have squirreled away. You can print tickets but not wealth.
A deeper insight is that the private sector has the same problem in saving, if everybody does it at once, against retirement. But I guess you're more inclined to have kids if saving obviously doesn't work.
How will adult kids view life-extending medical breakthroughs that extend the lives of the aged parents they're then supporting?
Life extension had better also allow raising the retirement age, which means either that saving cannot work (in that it cannot avoid this worker imbalance) or that there must be a constant population explosion.
Aside from your theoretical framework regarding the nature of 'money', Social Security can be looked at as an annuity although it's not an annuity. If the private sector can't supply an income stream to savers and investors then how can it supply the social security trust fund? The defintions regarding the nature of social security have become almost meaningless. It's not insurance so it can't have the properties of an 'annuity'. It's a transfer payment which can be only be met a couple of ways: 1) Increase taxes on working folks and transfer those additional funds (less the gov't vigorish) to current recipients.
2)Lower the promised benefits which have been 'paid for'. 3)Reduce the cola's or misreport real inflation and inflate the liabilities away. 4)Reform the system and restrict the ability of the government to buy votes with what remains of the 'trust fund' while the sytem is privatized.
Only no. 4 has yet to be tried while nos. 1,2 and 3 have been tried to some extent and have solved nothing.
RE: Social Security should be income- and asset- balanced, but it will never happen.
I think 'clawbacks' based on income and higher deductions will happen. It is the assets part that is the stickler. Folks can have low incomes and lots of assets and do not have to ennumerate all types of assets to the assessors as with income.