Social Security: What Is a “Crisis”?

At the risk of sounding Clintonian, I think that the dispute over whether Social Security is in a state of “crisis” can be rescued from sterility by closer attention to the meaning of words.

“Crisis” is vulgarly used as a synonym for “imminent peril”. By that standard, the current financial state of the Social Security system is not a “crisis”, for it collects substantially more in taxes than it pays out in benefits, and may never deserve that moniker. At least, the burden imposed by a steadily increasing ratio of retired to active workers may not reach the point where the latter cannot fulfill the promises made to the former. Taxes will have to rise, or other expenditures be cut, but a moderate optimist can forecast, without being absurd, that Social Security obligations will not “bankrupt America”. Well, not as fast as they will bankrupt the European Union and Japan. One could say that there is no crisis so long as we can look forward to being the last cripple standing.

The real meaning of “crisis” is, however, the moment when a decision must be made. Munich was a crisis, because the English and French governments had to choose the path that they would follow in confronting Nazi aggression. The panzers were only on the outskirts of Prague, not Paris. But, when they reached Paris, the situation was past being a crisis; it was the consequence of the democracies’ failure at the moment of crisis to judge wisely.

In that sense, saying that Social Security is “in crisis” is not hyperbolic. Reform – the substitution of private savings for public liabilities – is a generation-long process, one that will grow more daunting as the population ages and the transitional generation grows smaller in relation to the retirees who rely on it for support. The window for fashioning a structure that will serve the real needs of the elderly, rather than simply mimic the state of the art in retirement plan design c. 1930, is closing rapidly.

Suppose that, way back in 1953, when Republicans controlled Congress and the White House, they had enacted Social Security reforms along the lines that President Bush now seeks, channeling younger workers’ payroll taxes into private accounts while maintaining promised benefits for those who were nearing retirement. From the 1950's through roughly the 1970's, Social Security would have needed supplementary funds to offset the taxes retained by their payers. In hindsight, it is a safe presumption that the government would have run a bigger deficit. In the long run, the additional borrowing would have been insignificant: the increase in on-budget liabilities would have been matched by a decrease in off-budget Social Security obligations. In the short run, there would have been more than zero impact, but it would have been a mere blip in budgetary math. By now Social Security would be predominantly a capital accumulation program, and liberals would doubtless be claiming it as their own invention, just as they now claim to have been in the forefront of fighting the Cold War.

As demography grows less favorable, switching from the system cobbled together on an emergency basis in 1935 to anything else will become steadily more difficult. What could have been done almost painlessly in the 1950’s will take a palpable effort in the 2000’s. By the 2020’s, the transition may well be too onerous too undertake. Inaction will have led to an irreversible decision: that a major part of the retirement income of most Americans will forever depend upon the willingness (and ability) of the next generation to support them.

Self-sufficiency for senior citizens ought to be among the most uncontroversial of aspirations. The reactionary liberals who murmur “no crisis” are not themselves ready to renounce it. In time, though, their resistance to reform can make it impossible to achieve.

Comments

[maged taman]

Americans' Future In One Plan
I know that most of you are busy to read my book. As I explained previously that Taman Health Plan (www.trafford.com) takes care of all the health care, Medicare, Medicaid and social security. It will threw away all bureaucracies out of window. Let me explain shortly how it works:
1- there will be no more health care insurance companies, no Medicare, Medicaid or Social Security. My plan will take care of all.
2- Basically will be only one Big Health care organization (Taman Health Plan or THP).
3- The center of the plan will be in Washington while the health departments in every state will be the branches.
4- One organized body will be taking care of the Health Care and long term care of all Americans replacing 1500 insurance companies, Medicare, Medicaid and Social Security.
5- This will allow us to provide a uniform service to all Americans every where in both inpatients, outpatients and long term care.
6- As you go to any Duncan Donuts branch your expectation is to have a fresh coffee and a donut with no long wait. We will try to provide a similar predictable service everywhere as Duncan Donuts. With having only one body will be able to do that.
7- The Capital of the plan will be the funds of Medicare and Social Security (before the bankruptcy of both systems). The maintenance will be a yearly tax from each of us (will replace our yearly social security and Medicare holding taxes). A percent of each of us go to his account cards and a percent go to THP itself. The money of the plan will be invested by the investing sector of the plan very likely in Wall Street.
8- We will have 5 ATM cards with a corresponding accounts. Card A (children), Card B (working group 18-65years old), Card C (Medicare card >65 years old), Card D (Medicaid card), Card E ( expensive medicines or investigations).We will have the health cards devoted to health care and long term care thus we will have: health cards, banks with accounts to each card and credit card machines in outpatients care and hotelling part of hospitals and nursing homes.
9- Cards pay for the outpatient medical care including doctors, emergency room visits, investigations, medical supplies, pharmacies and the hotelling part of hospitals and nursing homes. While the medical part of hospitals and nursing homes will be budget by the plan itself.
10- In the first year of issuing cards: Card B and C (most of people) will have a bonus it could be a percent of their Medicare and social security withholding (70 % or so). We will try to be fair to every one but every one has to now that most of us already lost a lot of money with the HMO's. For next year new comers to card B when first issued will have a bonus of 50,000 dollars. It will change every year by a percent a according to inflation.
11- every one of us will get a statement every one or two months of his card account. Card B account will phase in card C at the age of 65. If card C account is vanished Card D will be issued (hoteling part will be less luxurious). Only few of Card B will have card D if there account vanish most likely those with severe medical problems.
12- So basically most of us will have our own account Card B then card C. Say you are 45 and you have now in your account 200,000 you can take one or more years out of work, you Can retire early if you like and with you card you control all the medical services and its prices.
13- With this card system we will end all bureaucracies of health care, Medicare and Medicaid. No one will stand between you and any medical or long term service (only you card). Shop around with you card, have early health care security and responsibility and invest in your health.
14- We will not need Social Security since after age of 65 we will be able to use our cards to stay in any nursing home each according to our account in card C or card D. So when you invest well in your health you will be able to enjoy a nicer nursing home when you get old (actually it will be also a kind of tourism).
15- The money in cards do not get inherited when we pass away but recycle in the plan to support the next generations.
16- The plan will have very positive effects not only in simplifying our care, save a lot of wast in health care, give early health care security and responsibility to Americans it will also have a positive effect on the economy, saving billions of dollars to Americans, creating jobs in health care and cutting outsourcing.
Very like you figure it by now I could have sold the plan to one of the presidential candidate before the 2004 election for millions of dollars ( they already spent 2 billion dollars). It is my gift to the American people (it will help the healing process of the two worlds America and the Muslim/Arabs).

Maged Taman.
2/20/05