November 4, 2015

GLANZEL | The Need to Reform Social Security

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By MICHAEL GLANZEL

If I were to make rank the important areas of my life in order, Social Security would probably rank around what I had for breakfast yesterday — and I’m sure most people from my generation would feel the same.  Social Security is a convoluted, esoteric idea that fails to cross the minds of America’s youth.  Yet for millions of Americans, the program is their only means of income — and for many more, the safety net of a Social Security check is a key component of their retirement planning.  Today, however, the guarantee of that check is not so clear, as questions surround the solvency of the institution.   

When President Roosevelt implemented Social Security in the late 1930s, the program was envisioned essentially as a retirement savings plan — whatever you contributed would later be returned in the form of retirement benefits.   The plan was also economically feasible, as there was a highly favorable 37 to one ratio of workers to retirees.  Furthermore, the program only covered those who were age 65 and above.  Considering the average lifespan was 61 during the 1930s, there wasn’t a vast abundance of retirees to suck up Social Security benefits.  Of course, the institution wasn’t perfect, as most women and minorities were not covered under program.  Nevertheless, the social safety net helped to lift millions out of the desolation of poverty (and I’m not usually one to praise the programs of FDR).   

While Social Security was a well-organized system in the 1930s, the program’s original practicality has vanished.  The original concept of Social Security focused on saving individual payments for monthly disbursements to the original contributor after retirement.  In essence, Social Security operated similarly to a modern 401K plan.  Unfortunately, this concept of savings has vanished.  Instead of saving individual installments for later use, the government immediately redistributes the payments to the program’s current recipients.  Thus, the government is only focused on spending for current retirees — and is failing to save for future retirees.

The economic feasibility of the program has also vanished.  Today, the ratio of workers to retirees has precipitously declined to three to one.  Certainly, this is not the fault of the government, as Americans are having less and less children.  However, the government has done little to account for the changes in life expectancy.  Currently, the retirement age still stands at 65 years old –– yet the average life expectancy has exploded to 79.

The combined failures of the modern Social Security program have taken a massive toll.  Currently, Social Security costs the United States $860 billion –– nearly a quarter of the federal budget.  At the same time, the program’s recipients can only expect to receive 75 cents of each dollar they put into the system.  If nothing is done to fix the growing problem in the near future, the program will be bankrupt by the mid 2030s.

This vision of Social Security is unacceptable.  From a purely pragmatic standpoint, the program’s exploding costs have greatly contributed to the nation’s exploding deficits and insurmountable debt.  From a more personal standpoint, the failure of Social Security threatens to destroy an institution that is relied upon by millions of Americans.

Certainly, doing nothing is not an answer.  As of now, not a single Democrat has proposed a substantive solution to the ballooning problem.  In fact, whenever anyone proposes a solution, the Democratic National Committee (DNC) inundates the airwaves with advertisements that attack attempted reforms. Thankfully, several Republicans, including New Jersey Governor Chris Christie, Ohio Governor John Kasich and Florida Senator Marco Rubio, have proposed plans to help keep the program solvent.

In my view, the first major step that must be taken is an increase in the retirement age –– preferably to 68 or 70.  Yet this increase must be phased into the system, as any changes in the program should only occur for those who are under the age of 55.  Furthermore, the retirement age cannot immediately jump from 65 to 70.  Instead, a gradual shift from 65 to 70 over the course of several decades must be implemented to allow the population to adjust.  Certainly, there are concerns that increasing the retirement age would be dangerous for industrial workers (for fear that older individuals would not be able to handle several more years of hard labor).  However, the average American does not retire exactly at the Social Security age, as the median age for retirement is 62.  Instead, people carefully plan out their retirement, and a gradual shift in the retirement age would allow for this careful planning.

Surely, the government must enact reforms beyond increasing the retirement age.  In my view, the government should reduce benefits for wealthy seniors and allow younger people to opt out of the program.  But most reform plans (including the famed bipartisan Simpson-Bowles plan) claim that an increase in the retirement age must be the first step in maintaining the institution.  However, if we continue to simply stare at the problem and do nothing, we can say goodbye to Social Security.

Michael Glanzel is a sophomore in the College of Arts and Sciences. He may be reached at mg786@cornell.edu. Cornell Shrugged appears alternate Thursdays this semester. 

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