All across America, men and women are losing their jobs. Not just minimum wage jobs either, which are more plentiful and easier to come by–but well paying jobs; jobs they’ve worked at until they became careers. Many of these newly unemployed will never work again.
Some will decide that these new circumstances present a good opportunity to start their own business, viewing their predicament through the ‘one door closes, another door opens’ philosophy of change. Others will make a beeline for the unemployment office to take advantage of whatever benefits they might be entitled to while searching for work. Some of those will find work. Many will not.
Older workers, or those who have been working regardless of a physical disability, may decide that this is a good time to take advantage of America’s great promise and apply for Social Security. It won’t make them rich, but it should help them keep roofs over their heads and food in their bellies.
The Way We Were
Prior to the Great Depression, if you were older and lost your job, you were completely on your own. If you fell, it was up to you to claw your way back up the ladder or else find ways to become the recipient of any private charities that might exist to help the indigent. The government was not in the business of helping its citizens, nor did it want to be.
After untold numbers of people found themselves in dire straights following the Stock Market Crash of 1929, politicians realized that they had better get to work and do something about the problem. After all, unhappy citizens quickly become unhappy voters. And unhappy voters will always opt for change; figuring, right or wrong, that any change will be for the better.
So, fearing for their own jobs, the political machine created jobs for others. They put citizens to work building the infrastructure that would ultimately help to make America great. Capping their societal achievements, they dreamt up and created Social Security, the system that most Americans have come to warily view as an entitlement and that, for many, is their lifeline following a lifetime of excess spending and insufficient savings.
It Started Off as A Good Idea
Social Security might even have worked were it not for the end of WWII and all those sex-starved soldiers who returned raring to start families or who, because of a lack of programs like Planned Parenthood, had limited options regarding that outcome. What followed was the ‘baby boom.’ Visualize a snake who has just had a nice fat rat for breakfast. The rat sits like a bulge in the snake’s belly. The snake represents time. The flatter part of the snake represents the normal total population of America at any given point over that timeframe. The bulging part of the snake, the rat, represents the ‘baby boomers.’ For many who are reading this, that fat rat is you—and me.
But politicians being what they are, they wanted their new Social Security system to make people start feeling better right away. That meant they needed to have Social Security mail checks to retirees who had not yet contributed into the program. So Social Security began making payments to the retired while those who were working began contributing to the new plan. This turned Social Security into a pay-as-you-go system instead of a fully-funded system as it was originally intended to be.
You Mean I’m Working For Mom & Dad?
Here’s where Americans found themselves deluded. Most people, if you ask, think that the money they pay into Social Security is the same money that they will later withdraw. It’s not. The money that you contribute today is being paid out today to those who are now collecting. Basically, children work to pay for their parents’ retirements.
This Ponzi scheme might even have worked had it not been for the arrival of the baby-boomers, that huge bloated snake belly on the demographic timeline. Baby-boomers somehow decided en-masse that having large numbers of children might not be such a good idea. So they reduced the number of children they had, not realizing that they were cutting off their own nose to spite their face.
You see, all those unborn children would have become the workers whose contributions to Social Security might have proven large enough to actually support the volume of baby-boomers who are now beginning to retire. Instead, we find ourselves in a situation where, despite ongoing increases to the Social Security tax rate, the sheer number of workers who pay into the system is now woefully inadequate to provide for the anticipated demands of those with outstretched hands ready to grab the money.
Can We Stop The Bleeding?
Indeed, in a 2010 message to the public, the Social Security and Medicare Boards of Trustees warn that Social Security’s reserve funds will be depleted in the year 2037. If you think about it, that’s not really too far off.
There are only two ways that Social Security, as we know it, might survive.
1. Raise Taxes
2. Raise the Retirement Age
As for the first, wage earners already know that taxes have been raised. In fact, most people now pay social security taxes on everything they earn. This year, Social Security taxes are paid on the first $106,800 of earned income.
The tax rate for employees is 4.2%; for employers it’s 6.2%, or $4,486 and $6,622 respectively. Medicare hospital insurance takes another 2.9%, split up between employees and employers. This, folks, is in addition to state and federal income taxes. That’s a lot of money. It’s hard to fathom that it can go much higher without causing a tax revolt.
Raising the retirement age is a fairly gruesome way to solve the problem. Simply put, by raising the retirement age, you are simply assured that more people will die before they’re able to collect. Meanwhile, it also means that those who are still living will have to keep working, thereby making it even harder for the younger workers to move into higher level positions that would normally have become open through attrition.
Maybe We Should Slow Down
It’s a hell of a mess that we’ve gotten ourselves into. It makes you wonder if those crafty politicians of yesteryear had any inkling of the problem they were creating for future generations when they dreamt up the concept of Social Security. Personally, I doubt it.
Like it or not, we’re in a pickle. There’s no easy answer, and I’m not going to pretend that I have one. I do feel, however, that the problem of bloated entitlement programs like Social Security have to be addressed by some courageous politicians starting right now. But just as our problems didn’t materialize all at once, it would be irresponsible on the part of those politicians to believe they can solve them all at once.
We’ve created a society that, for better or worse, depends upon those altruistic yet paternalistic programs set in motion by an earlier generation. We need to be weaned from them slowly, but only after our leadership creates viable alternatives to those programs that they now seem so anxious to rip apart.
Small, steady course corrections must rule the day, with time enough between them to evaluate the societal impact of those corrections. My father, a very wise man for whom I have the greatest respect, used to admonish me in Italian when he saw my young impulsive self react to events in foolish ways. “Va lento, Jim… Va lento.”
In other words, “Go slow.”
Photo credit: National Park Service - Ground Snake
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