Social Security Prefunding – A Personal View from a Baby Boomer

I am putting in my 2 cents by illustrating how the debate looks to me – someone who started paying Social Security just about exactly at the time the Greenspan Commission raised the tax rate. That makes me (and my huge cohort of same-age people) the person most likely to be adversely affected by some of the proposals currently out there for “reforming” the Social Security system.

First, lets recognize what FDR did back in the 1930’s. He wanted to provide a benefit for then-old people who didn’t have any savings, but he didn’t want to make anyone have to pay twice. That is, since the old folks of the 1930’s couldn’t fund themselves (since they were old already) the only other people around to pay up were the working age people of the 1930’s. How to make them pay for somebody other than themselves? Promise an “intergenerational compact” in which they too would be paid by working age people when they got to be old enough to retire. That way everybody got a Social Security check and nobody had to pay more than once.

But FDR didn’t reckon with the Baby Boom. By 1983 it was clear that the system would run into problems when the huge cohort of which I am a part retired. There wouldn’t be enough money in the system to pay them so the Greenspan commission raised SS taxes more than enough to pay the retirees of the 1980’s, 1990’s, 2000’s and 2010’s. The system accumulated surpluses which it lends to the Federal General Fund and which will fund us baby boomers when we retire.

Note well three points:

1. The 1980’s, 1990’s, 2000’s and 2010’s are almost exactly the whole of my working life.

2. During that period I have been paying (or will pay) SS taxes that paid or will pay for the retirees of the 1980’s, 1990’s, 2000’s and 2010’s.

3. During that period I have ALSO been paying extra SS taxes that are intended as a surplus out of which I (and my cohorts) will have our OWN retirements funded.

That means that I and my Baby Boomer buddies are the ONLY generation that has been stuck twice. We have paid for the retirements of the old people who were old while we were working AND we have paid extra to prefund our own retirement.

I have to say that I was unhappy – to put it mildly – to have to pay huge SS taxes back in my 20’s to support my grandparents in a lifestyle that was many times more affluent than what I could afford at that time. But that is nothing to how unhappy I will be if the government reneges on its intergenerational compact to me and not only makes me pay twice but cuts the benefit to me just when it is my turn.

There is no reason for the Federal Government to pick on me and my SS expectations as the particular expenditure that is breaking the back of the fiscal soundness of the USA. Any other expenditure or revenue cut can be pointed at as the straw that broke this camel’s back. My own choices for the straw that broke this camel’s back are exorbitant defense expenditures, tax cuts for the rich, and medical expenses. But the basic point is that I have already paid my “share” twice and will be sure to communicate this to any politician who asks for my vote.