This week, Congress approved a temporary government funding package, averting another potential shutdown until at least next year. As always when this happens, there are some key issues that can derail all negotiations. This time, the most important of these was funding for Israel. But what doesn’t seem to be at stake is the eternal third rail of American politics: Social Security. Approximately 10,000 baby boomers retire every day. And the ratio of taxpayers contributing to Social Security to retirees who need it is shrinking. So we looked at Social Security as it currently stands, at least in its current form, as the program moves rapidly toward bankruptcy. Is it really acting as a lifeline or collecting money from people who need it?
The Social Security Act was signed into law on August 14, 1935. At the time, he was one of 7.8 million Americans eligible to receive benefits. The first person to receive them was a woman named Ida Mae Fuller. She received her first monthly check in 1940. She is 65 years old and her check was for $22.54, which is about $500 today. Interestingly, she is a staunch small-government conservative and is on record as opposing increases in Social Security benefits in the 1970s, according to the History Channel. Fuller was in her 100th year when she died in 1975. Her Social Security payments were a little less than $550 today. In the nearly 40 years since her retirement, she has received more than 900 times her investment.
It probably won’t shock you to hear that times have changed since Ida Mae Fuller received her first check. First, fewer than 8 million Americans were eligible for Social Security in 1935. In 2020, approximately 70 million Americans received Social Security. While this is an important lifeline for many retirees, it is also a program that can seem untouchable to both parties. With bankruptcy looming as early as 2033, it seems inevitable that something will have to be cut to keep Social Security afloat. The question is whether the cuts are to other welfare programs or to Social Security itself.
On a recent episode of Hear Me Out, we discussed this topic with: Eric Boehm Reason magazine. Our conversation has been condensed and edited for clarity.
celeste headley: So what are your opinions on Social Security?
Eric Boehm: Social Security was actually a program created to protect against poverty in old age. That’s where this conversation should start. Because that’s the real origin of this program. And we were talking about extreme poverty and poverty in the 1940s, which is very different from what we think of poverty today.
So I think the idea that people who are too old to work shouldn’t be left to starve is a pretty noble idea. And even as a liberal who doesn’t think the government should do that much, government action to provide a base level for people to avoid retirement still seems pretty reasonable. Masu. poverty. But Social Security by and large isn’t like that anymore, right? Sure, there may still be older people who need help making ends meet, but retirees have recently become one of the wealthiest groups in this country.
The way Social Security works is basically a conveyor belt of money. Because it is funded by payroll taxes, it is a transfer of wealth from young, working, and productive people. Those taxes are then sent directly to retirees. And unlike in the 1940s, retirees today are generally better off than those who finance their retirement through Social Security. So I think we need to fundamentally rethink the program.
Not in 1960, when Social Security began, but in 1960 alone, there were more than five workers per Social Security recipient. And today, that ratio has dropped to less than 3 for him. The number of employees per beneficiary will be approximately 2.8. That means fewer wealthy Americans typically fund their retirements. And I think the fundamentals of what Social Security means and what it’s trying to do have really changed.
So I would like to reframe this discussion from the idea that those of us who are proposing reforms are somehow breaking our promises to retirees. Because it’s not. That promise has been upended by decades of greater prosperity for Americans, which is great, but also by changing demographics and economic growth. So, naturally, the structure of this program should also change. We should talk about it openly. If we don’t do anything, we’re going to hit a brick wall in the 2030s anyway. So whether Americans want it or not, this conversation is coming and we should have it sooner rather than later.
So what is the solution to all this?
Very broadly speaking, I think we should stop providing Social Security to the wealthiest recipients of Social Security, namely wealthy seniors, or at least significantly reduce the amount of Social Security provided. Masu. That may be a painful way of looking at it. I don’t think it’s that hard. I think anyone who honestly considers this issue would frankly come to that conclusion.
And what does wealthy mean?
That is, these lines can be drawn anywhere. I’m not saying that we should draw a line at a certain income level or anything like that. House Republicans proposed fairly deep cuts to welfare programs (on the order of $150 billion), which they sought to save by cutting discretionary budgets. The reason these changes are occurring is because social security costs are ballooning, and they are growing at a considerable rate. The latest CBO report states that Social Security, and a related issue, Medicare, will account for about half of all spending growth over the next 10 years. And that’s what’s pushing out other things in the budget. This pushes other items in the budget into the realm of having to borrow more to pay for them, something Washington has been less willing to do lately. So if you don’t intend to borrow money to fund the discretionary part of your budget, you should remove it.
In other words, rising social security costs are forcing policymakers to choose which will be paid first. I don’t have enough money to spend freely. So who will receive the money first? Pay wealthy retirees first? Or will the money be given first to poor working class families and single mothers with children? You look at this and think, “Of course, wealthy grandparents with millions of dollars and huge nest eggs, those people should get paid before other people who might be in trouble.” I don’t think anyone can say that.
That’s the basic question to ask here. This is a question that no one really wants to ask in Congress. Because we’ve sort of siloed Social Security into, “Oh, this is mandatory spending.” we can’t touch it. ” But no, every year, every time we pass a budget, we choose what to prioritize, and Congress prioritizes funding for wealthy seniors over other things. It could be anything — it could be welfare expenses, it could be defense expenses, it could be anything. But if you’re going to pay wealthy seniors first, it means you have to give up everything else.
In general, I think the libertarian position is as follows. Social Security is a welfare program. Let’s get rid of it. That’s what I want to hear from libertarians.
I think there are many things that can and should be done. And, of course, I think the ultimate liberal approach is to abolish Social Security altogether. I don’t think that’s realistic at all. But, of course, if Congress wanted to propose it, I would probably support it, depending, of course, on the details.
Politically, there is a sense that because people are paying into Social Security, they should get something for it. I also think there’s always a desire to make sure that people who are older and can no longer work are not just completely destitute. Maybe the government doesn’t need to do it, but there will need to be some kind of social safety net. But that being said, we have long argued that changes to Social Security, entitlements, are destroying the safety net. This is an argument that libertarians have been making for some time. I think this is a discussion that isn’t heard very often. Because now there are groups on both sides of the aisle who don’t want to touch Social Security or even discuss its costs. Possibly social security.
Listen to the full episode of Hear Me Out to learn more.
There are always debates related to the wealthiest among us and Social Security. One is, “Why are they on Social Security?” Because it represents only a small portion of what they are planning for their retirement. I don’t think the wealthiest among us even consider that. On the other hand, what about simply raising the retirement age? Life expectancy now is more than 15 years higher than it was when Social Security began. Will that solve at least part of this problem?
If we’re going to talk about solving the Social Security problem, there should be a lot of different solutions, right? I think raising the retirement age is probably one of them.
Although a bit misleading, this is one of my favorite statistics. When Social Security started, you could start receiving benefits at age 65, but the average life expectancy in this country was about 61 years. That is, the average person actually died before becoming eligible for Social Security, which is clearly no longer true. Now, child mortality rates were also much higher back then, so the overall numbers are down.
But consider the wealth accumulated by the American retirement class more recently. Average retiree wealth in 1989 – That’s not that long ago, right? According to the Federal Reserve, Taylor Swift was worth about $270,000 in the year she was born. Now he is worth $538,000. In just 30 years or so, your inflation-adjusted amount will be double his.
I don’t think anyone in Congress wants to think of it as a welfare program, but that’s what it is. You’re sending money from one group to another. And it makes no sense at all. We will never be able to get Congress to authorize a welfare program that takes money directly from workers’ paychecks and transfers it to the wealthy elsewhere in this country. Neither party will support it in Congress.But that’s what we have and it lasts only because this is the way we’ve always done it that.