My response to Krugman--Social Security, Round 1

Hating on Social Insurance (from Krugman's blog posted 5/25)

What Digby said. Of all the things to worry about in today’s world, the prospect of Social Security shortfalls several decades from now doesn’t rank high on the list. But there’s a whole generation of Very Serious People who think that worrying about entitlements is how they demonstrate their seriousness — while, say, worrying about climate change is hippy-dippy. Indeed, we find the same people who declare that to show how responsible we are we must do something about Social Security RIGHT NOW declaring that saving the planet is, you know, expensive, so let’s not.

My response to Krugman:

I worry about entitlements AND climate change…however SS faces short falls within THIS next decade. You do know that Congress doesn’t actually keep the the excess payroll taxes in a special coffer? All the extra tax revenues from SS are placed in Congress’s General Fund and SPENT. What is left are IOUs from the Federal Government to the Social Security Administration (SSA). When SS receipts are outweighed by SS payouts to retirees in less than one decade, the SSA will have call Congress and demand repayment of the IOUs. Congress will have three decisions when this happens and may choose a combo of all three: increase borrowing, taxes, and/or decrease spending. The best thing Congress could do would probably be to get RID of this inefficient retirement program–however is unlikely to happen since many millions of Americans (including some of my family members) are now dependent on SS for a majority of their retirement.

Back in the Great Depression, when the idea of SS was born in America, there existed very few, if any, private market solutions for retirement. Now that reality has changed and private firms offer many retirement solutions in the form of annuities, IRAs, mutual funds, etc. So why is the inefficient federal government burdening employers and employees with a 15% tax to fund a pay-as-you go ponzi scheme also known as Social Security. I’m 22 and will probably never receive ANY benefit from this program even though people in my generation will (respectively) be funding SS recipients at a ratio of 2:1.

— John Vignocchi