VICKSBURG - Suppose a new bank opens. Suppose the fine print describing its savings accounts has this provision: In the event of the death of the account holder, all money in the account becomes an asset of the bank.
Reckon there would be many deposits?
Of course not.
That provision is part of our Social Security "accounts," however, and explains, at least in part, why Congress is reluctant to entertain any notion of letting people choose to control the investment of part of their withheld wages. As things stand, the heirs of people who work their whole lives and pay tens of thousands of dollars into Social Security get zip if death comes knocking before gold watches are presented.
On the other hand, and in fairness, Social Security does offer survivor benefits (when there are eligible survivors), disability and other payments. In fact, only 63 percent of benefits flow to retirees in whose names wages were paid or withheld.
Too, Social Security offers something no commercial bank could ever offer. Many retirees draw benefits from their Social Security "savings" that far exceed their deposits and the interest on those deposits.
See? It's kind of a lottery with the Grim Reaper drawing the numbers. Money paid into the system by those who die before retirement goes to those who don't, often well past the time their accounts, if private, would have run dry.
Defenders of Social Security, as is, keep talking about how the program is so well-conceived, so totally fair. Well, it's simply not. It's a totally arbitrary, random kind of thing - excellent at doing what it was designed to do - but far from perfect.
As for President Bush's suggestions, there are many blanks left open - especially in the math.
Speaking across the nation, and recently at the Nissan plant near Canton, Bush tallied the benefits of partial privatization among many other options.
Allowing people to have private accounts as part of the Social Security mix would be wealth-building, the president says. Instead of defaulting back to the government, workers' assets would be inherited by the next generation, creating nest eggs.
Absolutely true, but …
- The reality is there are no "separate accounts" within Social Security. Dollars paid in today by the self-employed, by wage earners and employers are paid out tomorrow. The president has said little about how to address the fiscal havoc that diverting some of those dollars into separate accounts would create in regard to paying today's beneficiaries.
- Congress treats the assets of Social Security no different than any other spendable income received by the federal government. If any of those dollars become "unavailable," Congress is in a real pickle about how to replace them.
But there's a larger picture - the one of how Social Security has shaped American life.
In FDR's era, when the highly controversial notion of a federal pension began to take root, things were very different. Not only were private pensions rare, many pension funds had gone bust in the Great Depression. Even in 1959, when the program was almost 20 years old, more than 35 percent of elderly Americans lived below the poverty level. Due, in part, to Social Security, that number fell steadily and was below 10 percent for the first time in 1999.
Social Security has also changed how we live. Where three or more generations often resided in American homes 60 years ago because the older people couldn't support themselves, today if three or more generations live in one home it's usually because a younger generation is struggling.
Where working people once knew they had to save from every paycheck because failing to do so would mean abject poverty, today most workers, especially those under 40, have no savings at all.
And mobility. There's an alpha-numeric soup of private investment options (IRAs, 401Ks and several variations of each) that can be taken from job to job. Coupled with ever-fewer employer-offered pensions and the "assurance" of Social Security, people have felt more free to change jobs, move around. (Not having to support mom and dad has had a role in this, too.)
It's anybody's guess as to when, whether and if substantial changes will be made to Social Security, but it's short-sighted to think of the president's proposal and others strictly in mathematical terms.
We are, indeed, a different nation, a different people, than we were before the program began. In the out-years, ideas being talked about today will bear not just on the income level of our descendants, but how they plan their careers and live their lives, too.
