The New York Review of Books: America’s Senior Moment
Posted by shannonclark on February 26, 2005
In the March 10th issue of the The New York Review, Paul Krugman has an article on Social Security reform. (The New York Review of Books: America’s Senior Moment) It is well worth reading no matter your political leanings or your personal feelings about “private savings accounts” as a reform of Social Security.
I think he may be underestimating the demographic impact of the baby boomers as they retire, though potentially changes in immigration as well as work flow patterns may help address the labor shortage in the US. Though work that shifts to other countries (as I predict will continue to increase over time) removes those worker’s salaries except in the rare case of ex-pats from the social security roles. Corporate tax reform might help address the general revenue losses (by increasing the actual corporate tax rate and/or minimizing the tax shelters most large corporations use to significently minimize their tax burdens) however this doesn’t address the Social Security revenue shortfall that probably will occur.
I also think that the current everyone pays in everyone gets model for Social Security may need to be rethought, and definitely the age of retirement should be changed to reflect changing society and personal health. It is one thing for a social insurance policy to insure people in the last decade of their lives but a very different thing altogether to pay out for three decades or longer.
As life expectancy rises likely past 80 and into the 90’s (and may already be getting near there for people who are already in their 60’s and 50’s) we are in a very different world than when Social Security was established. At that time few people lived to 70, so retirement at 65 meant a few years at most.
At the same time many people who get the highest social security payouts possible (those who paid in the most over their lives) are the very people who, in retirement, truly do not need the funds. I know of a few who donate their entire social security checks to charity each year – noble, but funds going to people who do not need them (these aren’t people who have just okay savings, I’m thinking of people who have millions in the bank, holdings of millions more, and retirement earnings in the many 100k/year from dividends and bond payments as well as real estate holdings – i.e. people who don’t need the money)
In my own thinking about the fairly distant future when I “retire” (I’m 30 now, so by current standards at least another 35 years) I don’t factor in Social Security at all. As well, I plan to be still working, probably teaching, and expect that my income plus personal savings will support me.