Thursday, January 22, 2009

Thought Experiment: Social Security

I was playing with Budget Hero today, and while this little Flash game is incredibly biased such that the only viable solution is to end the war immediately to save our country, I ended up doing some thinking about Social Security.  What is it, and what should it be?

What it is:  Social Security takes money directly from working people and directs an essentially unlivable wage to those who are disabled and unable to work or have turned 65.

That’s all it is.  I think when people classify it in other ways, it’s false or dishonest for the purposes of swaying your opinion.  Let me show you.

  • “It’s a retirement fund, therefore I should get some when I retire.”  No, because Social Security does not save your money (though it does have enough surplus for the Federal Government to have borrowed funds against SS – another story for another time).  Social Security is not a government-run IRA.  If it was, it wouldn’t pay out a substantially lower amount of money than was put in by each person.
  • “It’s wealth redistribution.” It’s not.  Social Security is paid out to disabled and people over 65 regardless of whether they need the money or are still working.  65 year old multi-millionaires who continue working after “retirement” can still get Social Security checks.
  • It helps the elderly pay their bills.”  I think this is misleading as well.  It picks an arbitrary age to start paying benefits to people, whether or not they need it or could continue working, and regardless of their employment (after you “retire”, you can go back to work and still collect SS).

Continuing the thought experiment, what should Social Security be?

I think social security should be defined as this:  Social Security takes money directly from working people and directs a more livable amount to those who are disabled and unable to work.

Notice the difference?  There’s no age.

A SS recipient should be required to prove that he cannot work any longer in order to get paid Social Security, otherwise we are paying able people to leave and stay out of the workforce.  Raising the age doesn’t solve the underlying problem, which is workers are giving money to people who don’t need it.  For many, the SS check is a bonus check for staying home.  That’s absurd.

Unlike the cold hearted capitalist many of you probably think I am, I believe the handicapped and elderly who cannot function should be helped out when they don’t have the means themselves.  As people continue to live longer and retirement age doesn’t change, the problem of paying those who don’t need it will become more substantial.

And what about those who don’t save for retirement?  My take is, those who don’t save for retirement would have to prove they aren’t able to work to collect.  That’s why there’s no age.

On the topic of fairness—which many will probably cry foul over on this type of plan, calling it unfair to pay some people and not others.  I ask,  is it fair for the workforce to keep paying trillions to millions of people who don’t actually need the money, and provide less for those who do?

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