Dear Readers, this is another one of my occasional experiments, so please be measured in your comments. The following was written as a ten-year retrospective article in 2042.
It was indeed an ugly surprise to many when the payments from Social Security in February 2032 did not come. Indeed, the phones in Congress rang off the hook, and the scroll rate on incoming emails broke all records. But as with most things in DC in the 21st century, there was no stomach to deal with the problem, as gridlock continued to make Congress a internally hostile but essentially passive institution.
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Part of that gridlock stemmed from earlier Congressional reforms that looked good at the time, but reduced the power of parties to discipline members who would not go along with the leadership. Part also stemmed from changes in media, which were developing in the 1980s because the media was increasingly out of sync with the views of average Americans, but came to full fruition after the internet became the dominant channel for news flow, allowing people to tune out voices unpleasant to them. Gerrymandering certainly did not help, as virtually all House seats were noncompetitive. Finally, the size of the debt, and large continuing deficits limited the ability of the government to do anything. The Fed was already letting inflation run at rates higher than intermediate interest rates, so they were out of play as well.
Despite occasional warnings in the media that began five years earlier after the Chief Actuary of the Social Security Administration suggested in his 2027 year-end report that this was likely to happen in 4-6 years, most media and people tuned it out because it was impossible in their eyes, and face it, actuaries are deadly dull people. Only a few bloggers kept up a drumbeat on the topic, but they were ignored as Johnny One-Note Disasterniks.
Shortly thereafter, the obligatory hearings began in Congress, and the new Chief Actuary of the Social Security Administration was first on the list to testify. First he explained that when the Social Security was developed, this safeguard was added in case the income and assets of the trust were inadequate to make the next payment, that payment would be skipped. He added that by law, skipped payments would not be made up later. After all, Social Security is an earned right, but mainly a statutory right and not a constitutional right. Then he commented that without changes, a payment would likely be skipped in 2033 and 2034, two skips each in 2035 and 2036, and by 2037 three skips would be the “new normal” until demographics normalized, but that would likely take a generation to achieve, as childbearing was out of favor.
There were many other people who testified that day from AARP, its relatively new but strong foe AAWP (w -> Working), and various conservative and liberal think tanks, but no one said anything valuable that the Chief Actuary didn’t already say: without changes to benefits or taxes (contributions, haha), payment skipping would become regular. It was a darkly amusing sidelight that members of the House of Representatives managed to trot out every “urban myth” about Social Security as true during their hearings, including the bogus idea that everyone has their contributions stored in the own little accounts.
The eventual compromise was not a pretty one:
- Cost-of-living adjustments were ended.
- Benefits were means-tested.
- Late retirement adjustment factors were decreased.
- All the games where benefits could be maximized were eliminated.
- Immigration restrictions were loosened for well-off immigrants.
- The normal retirement age was raised to 72, and
- “Contributions” would now be assessed on income of all types, with no upper limit. That said, the rate did not rise.
That ended the payment skipping, though it is possible that a skip could happen in the future. As it is, much of the current political climate is marked by intergenerational conflict, with Social Security viewed derisively as an old-age welfare plan. A visitor to the grave of FDR did not find him doing 2000 RPM, but did note the skunk cabbage that someone helpfully planted there. As it was, quiet euthanasia, some voluntary, some not, took place among the elderly Baby Boomers, tired of being labelled sponges on society, or picked off by annoyed caretakers.
It should be noted that as benefits were cut in real terms, friends and families of the some elderly and disabled helped out, but many elderly people led lives of poverty. Perhaps if they had expected this, they would have prepared, but they trusted the malleable promises of the US Government.
The open question at present is whether it was wise for society to promote collective security schemes. As it is, with seven states in pseudo-bankruptcy, many municipalities in similar straits if not real bankruptcy, and many countries suffering with worse demographic problems than the US, the problems of these arrangements are apparent:
- Breaking the link between childbearing and support in old age discouraged childbearing.
- Every succeeding generation of participants got a worse deal than those that came before.
- Politicians learned to prioritize the present over the future, and use monies that should have been put to some productive future use into the benefit of those who would consume currently.
- Complexity encouraged gaming of the system, whether it was maxing benefits, or faking disability.
- Retirement ages that were too low made the burden too heavy to the workers supporting retirees.
Future articles in this retrospective series will touch on some of the other problems we have recently faced, as many involuntary collective security measures have hit troubled times, and the unintended effects of too much debt, both governmental and private are still with us.