|
|
Social Security Reform and Transcending the Industrial Age Retirement Paradigm
March 2003
By Dean Chambers
The current federal social security system compares to currently available retirement options as an old obsolete ENIAC computer made of 18000 electron tubes would to a new personal computer running an AMD Athlon XP 3000 processor. Unlike the computer, our government retirement system has changed little since its inception as a depression-era safety-net program. Demographic changes and evolving assumptions about retirement have entirely changed the very nature of the social security program.
The Congress legislated the retirement age of 65 in the 1930s at a time when the average life-expectancy was not much more than 65 and the percentage of the American population over the age of 65 remained quite small. The other major drawback of the current system is that it has been a pay-as-you-go system from day one. The money going into the system in part went right back out to those who were eligible for benefits. This was financially strong when social security had a very high ratio of payers to payees. But the demographics trends that have increased the number of retired individuals to those still working have rapidly made that ratio less financially beneficial to the social security system. The program, history, has received several bailouts, all of which involved increases in the payroll taxes funding social security. Barring real reform, future bailouts that will be forced by the continued demographic trends will always involve more increases in the social security payroll taxes. The bleak future will become reality when we reach a point where social security payroll taxes meet or exceed the rate possible at the Laffer curve peak and sufficient revenues to fund social security are truly not available. That disastrous economic reality would force true reform of the system at time when it will be far too late.
The time for reform is now and yesterday would have been better. Every day we don't reform social security is just one more day closer to the financial explosion that will make reform both necessary and far less advantageous. A solid reform will first transcend the old collectivist system that puts all employees in the same system and moves everyone below a certain age out of the current system and gives them the option of having an individualized retirement account through the social security administration. The reform should also recognize the right of individuals below a "beyond the point of no return age" to simply opt out of the system entirely and never pay social security taxes again. The plan can offer a disincentive for middle-aged individuals by offering than an alternative of the individualized retirement account administered through the social security administration. The second component should be individualized control of those accounts. The owner of that account should have full discretion over where the money is invested, be it the stock market or corporate bonds or even government bonds. And lastly, unlike the social security "account" fund that disappears into nothing when the individual dies, this individualized account must be a financial asset that can be passed along to heirs who themselves can either cash out or reinvest that money. The current social security system forces the individual to pay into a fund for their entire working lives that will be worth zero upon death. That is fundamentally wrong.
A reform plan that revolves around individual choice, individual control, and ownership of the "nest egg" is one that will help us transcend industrial age assumptions about retirement and begin to consider paradigms about how we live our lives in the post-Industrial age. The old paradigm involved one spending most of the productive years making widgets or some comparable industrial type work until reaching a designated age of retirement, at which time one gets off the industrial treadmill to have some time to do other things in life. Many individuals are realizing the better route to a fulfilling and meaningful life involves finding ways to make a living doing what they truly enjoy and finding time to do the "other things" in life during the more productive and healthy years of their lives rather than procrastinating to the magical "retirement" years. Our post-Industrial society values the judgment, expertise, experience, and wisdom of older individuals who want to make those attributes available in ways not possible by retiring.
Individuals are beginning to want an increased control over their lives and will demand alternatives to the industrial-age paradigm of 40 years of work followed by retirement. Our reform proposal must offer the opt-out arrangements that will accommodate this growing demand for new self-chosen and self-designed retirement options. A truly dynamic social security reform plan capable of meeting the challenges of the future must be one able to meet the needs of individuals in the future.
Mr. Chambers is national chairman of the Conservative Reform Coalition and author of the regular "Bull Moose" commentaries featured at ConservativeReform.us
Related Articles:
Technology and Politics - NovusNow.com
The Revolution Within - Upadarian.com
|
|
|
|
