Fixing Social Security

Two words: Social Security. Together they’ve come to represent a massive defined-benefit pension system in which all working Americans must participate. The system worked well for decades, when life expectancies were lower and a smaller percentage of the population was in retirement. Now, even though a full 12.4% of most workers’ gross salary is devoted to Social Security, the system may run bankrupt before young Americans today retire. Some Republicans are proposing to privatize the system, while Democrats are fiercely fighting change. Why not start with a simpler question: why does Social Security even exist?

Social Security was originally intended as a way to guarantee that the elderly would not fall into poverty after leaving the work force. It has now become the primary, and in many cases, only savings program in which most Americans participate. But why force Americans to save? This is perhaps the most socialist part of the American economy, wherein every working American must set aside one-eighth of their pay for retirement. Rather than forcing Americans to save, why not return Social Security to its original purpose of providing benefits to the impoverished elderly?

By reducing the scope of Social Security benefits so that they cover only the elderly poor, the program will again provide a safety net for the elderly, and not a forced savings program. The resulting program shrinkage can be used to both cut taxes and make the program solvent over the long term.

In practice, this kind of change could be implemented through significant means-testing of Social Security benefits. The change could phased in so that it affects only young workers, while preserving benefits for those who have paid higher rates for decades. By modifying Social Security from a savings program into a safety net, we can both cut taxes and provide for the less fortunate among the elderly. Who doesn’t want that?

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