The Social Security question…an op-ed.

by coberly

Suppose you take your somewhat nerdish 13 year old son out for a
drive. You pull gently away from the stop light, and your son, who
has been doing some reading, remarks that gas engines are not very
efficient at low speeds. In fact, at ten miles per hour you are
probably only getting ten miles per gallon.

A little later you are motoring down the highway at about 60 miles
per hour, getting, as you know from experience, about twenty miles
per gallon.

The thirteen year old does some calculations and says, “do you
know that when we were going ten miles per hour and getting ten
miles per gallon we were burning ONE gallon per hour. But now that
we are going 60 miles per hour and getting 20 miles per gallon, we
are burning THREE gallons per hour! WE ARE ALL GOING TO DIE.

Of course the average 13 year old is smarter than that. But he is
not getting paid Big Money by Big People to tell Big Lies and sow
panic among the innumerate masses.

But there are such people who work for think tanks and get paid to
spend their working lives thinking of ways to lie without ever
saying anything they can go to jail for.

One of their favorite lies is that “Back in 1950 there were 16
workers for every retired person collecting Social Security. Now
there are 3.3, and by the end of the century there will be only 2
workers for every person collecting Social Security.”
by coberly….the rest below the fold

They want to conjure up an image of you having an unwanted elderly
guest at every dinner and lunch and breakfast, borrowing your car
and sleeping in your bed , and… well, not that… though, in
fact, yes that, some politician said once… though of course he
was only joking. Maybe. They don’t want you to take a hard look
at that elderly guest and recognize him: he is yourself, or the
ghost of yourself 40 years older. And they sure don’t want you to
think, hmmm, 3 of us have been supporting that guy for years now
and I hadn’t even noticed it. How bad can it get when only two of
us are supporting him?

But first, let us look at that 16 to 1, workers to retirees, in the
good old days. (Warning, I just slipped one by you and you didn’t
even notice. That’s how it works. We’ll come back to it.)

The following is a very simplified model of what actually
happened. If you get the real numbers, it will make the picture
more complicated but not change the essential fact.

In 1942 there was a certain population of people who had been
paying a 1% tax on their income for Social Security for the last
three or five years. As yet there were NO retirees receiving
Social Security benefits. Now throughout the next year, all the
people who had been 64 turned 65 and retired. And all the people
who had been in high school got a job. (I said this was simplified.)
Now if each age cohort is the same size, there are about 47 workers
paying for each retired person. Can you see why? Imagine there is
exactly one person at each age: one 18 year old, one 19 year
old… and so on to one 63 year old and one 64 year old, and now
one retired 65 year old. 47 people paying a 1% tax can more than
pay for one person getting a benefit equal to 40% of average wages.

The next year everyone is a year older, but there is a new 18 year
old, and now there is a 65 year old retiree and a 66 year old
retiree. So our 47 workers have to support two retirees, for a
worker to retiree ratio of 47 to 2, or about 23 to 1. Next year it
will be 47 to 3, or about 16 to 1. Hmmm. 16 to 1. Now where did
that come from? This process goes on for say 12 years and now the
ratio is 47 to 12 or about 4:1. And all without any terrible baby
boom crisis, or even people living much longer than they used to.
But speaking of living longer. At about this time, natural
mortality does start showing up in the numbers, and each new year
will not result in a “one step” change in the ratio of workers to
retirees. Simply because the retirees are dying off at a rate that
more or less equals the rate at which new retirees come on line at
age 65.

So that is more or less how you get from 16 workers for each
retiree to about 3 workers for each retiree. We might stop here
and note that if each retiree lives an average of 12 years, and
workers work an average of 40 years (college and unemployment and
general “finding myself” take a bite out of the original 47 years)
we find that other things being equal it will require each worker
to pay about 12% of his income to support those retirees… or
himself when he retires, as it amounts to the same thing. Since
his boss pays half of that 12%, he only “sees” a tax of 6%. And in
fact if he is a normal person he has been doing this for years
without even noticing it.

But here is the Biggest Lie of all. Something the Big Liars didn’t
tell you when they said “Sixteen workers for each retiree getting
Social Security.” Back when that was true, in 1950, there were 3
old people on welfare for every retiree on Social Security. So
your sixteen workers were supporting one retiree on social security
and three old people on welfare. Or about four workers for each

And back then welfare paid better than Social Security. I won’t
mention that back then the workers didn’t have as much money as
today’s workers left over after buying groceries for their kids ,
and certainly those workers in the next century who will be facing
that 2 workers per retiree “burden.” But it does have some bearing
on that “generational fairness” issue that you may have heard about.

Generational Equity is where a Big Liar calculates the money you
paid in to Social Security and the money your grandma paid in (to
Social Security. never mind all that about paying taxes for
welfare, while supporting her own granny, and saving money for your
education) and tells you that Grandma owes you, kid, big time. And
the way you can collect your generational equity is to cut Granny’s
Social Security so you can invest the money is this here Mutual
Fund that I just happen to have on my desk.
This one by coberly