Crafting a National Pension Plan

Opponents of a national retirement program, commonly referred to simply as “Social Security,” tend to take the view that each person is responsible for their own costs of living and that a secure retirement is something to be enjoyed by those fortunate enough to have earned enough money throughout one’s lifetime to sustain themselves for 20 or more years without gainful employment. Such an attitude completely ignores the concept of gratitude and indebtedness we owe to our predecessors, assuming, incorrectly, that their own successes are completely independent of any other factors and are simply due to their own superior capabilities. According to these folks, each person is fully capable of planning for their retirement, and shouldn’t need to depend on government subsidies to enjoy their golden years. Indeed, their “why should I pay for you” comments show how little they appreciate the hard work that was put into their own upbringing and how little they understand the sacrifices made by preceding generations who created the progress this country has enjoyed.

You can believe what you want to, but I’m here to tell you that any success you may personally have is the result of many different people over many years and extends far beyond the powers of your own mind or capabilities. In order for society to function and progress, the combined efforts of all of its members are required, and as such, we all owe each other a debt of gratitude to some degree. Were it not for the care of our parents, we’d never make it into the world as responsible, productive adults. Were it not for our teachers, we would never learn the skills with which we support ourselves. Were it not for the desires or needs of individuals, we would not have jobs to support ourselves and would instead be a nation of subsistence farmers, scraping by just what we need to survive. We are all responsible to each other in this sense, and as such, we have a responsibility for each other too. One of those responsibilities is to assure that no one is left behind in poverty once their most productive years are behind them. As such, any national retirement program must have at its center this concept of shared responsibility, shared gratitude, and shared respect.

Like other tax-supported programs, the national retirement plan exists as a compact between the people and our government. The agreement has been that when you work, you deposit some of your wages into a social insurance fund. Your employer deposits a like amount as well. When you retire, you will receive a monthly stipend until you die. The government, who is entrusted to safeguarding the funds for their intended purpose, administers this fund. In theory, the number of workers paying into the fund at any one time would exceed the number of retirees withdrawing from the fund, keeping the fund solvent in perpetuity. But the theory has not held, and as a result, our national retirement program will be unable to hold up its end of the deal. The compact between citizens and government has been broken and the time has come to fix things up.

Although today’s retirees are receiving their promised returns, the rules for future retirees have been shifting over the years, raising the retirement age and preparing people for decreased returns. The reasons for this decline are fairly simple: there are more people retiring and drawing from the fund than there are to replace them, even in this age of dual income families, and wages haven’t kept pace to make up the difference. The other reason for the eventual collapse of the current system lies in the betrayal of government and their unwillingness to protect the funds for their intended purpose. Like so many other supposedly devoted taxes, our politicians have consistently raided the retirement funds over the years, replacing the actual money with worthless I.O.U.’s. Today’s workers have been told as much, the administration saying in effect that there will be no money for you when you retire. But go ahead and keep paying in anyway, because that’s how the system works.

Even without these major problems, the system itself fails to offer retirement security to all of our citizens equally, something that any tax based program should strive to do. The most glaring example would be for stay-at-home moms, who because of their absence in the business world have no earnings per se. But their indispensable tasks of rearing our young is worth its weight in gold and should be recognized as the valuable service that it is. Any national retirement program must be offered to all legal citizens equally.

Reform must occur in two separate phases. We must stabilize they existing system to the point that it will meet most, if not all, of its obligations to the citizens who are nearing or are in retirement now. Further, it must figure out a way to make amends to the workers who have and will continue to pay in, knowing full well that they will be getting the short end of the stick. But rather than try to patch a clearly breaking system, we need to let it phase out in favor of a more equal, and arguably more efficient national retirement program.

Retirement programs exist so that we don’t have to work until we die. But for most of our working years, we are either obsessed with saving enough money to retire on or are completely oblivious to what we will actually require once we do retire or how we plan to get it. In today’s business climate, private pensions (which are designed to supplement the national retirement program using your own dollars) are shaky for many, with companies going bankrupt and fleecing employees out of years of built up retirement funds. The relationship between employees and employers has also drastically changed, with the lifetime employee almost being unheard of. The result is any number of smaller 401k plans without the ability to achieve compound growth. It is painfully obvious to many that their best source of income in retirement is likely to be social security funds. This is the reality we live in, and so if we endeavor to continue to offer a national retirement plan, we must think of completely new ways of designing it.

While keeping the existing program on life support is important, first I’m going to propose a national retirement plan for future generations of workers. I think that even though we need to try to fulfill the promises to the people of today, it is also our duty to create a more lasting system than we have now. For any reform of the current system would naturally have to include plans for continuation of some sort, and I believe that our current system is too screwed up to rebuild. Sometimes you really do need to start fresh.

I had originally planned to present my plan for an entirely new retirement program for future generations of workers in this essay, but that will now have to wait until next time. I felt that I needed to defend the concept of a national retirement plan once more before I could go on to explain my ideas. For it is essential to understand that a national retirement program is more than just a reshuffling of tax dollars from one person to another. The essence of our working life is the ability to some day kick our feet up and retire. This is one of the promises of America. This is a part of the American dream. It is something the we, as a society, have affirmed over the last 70 years through our continued support of a system that once was good, but now is sinking.

Defining Social Security

Social Security is really a widely encompassing description for a variety of government assistance programs including Medicare, Medicaid, disability benefits and retirement programs, to name the most common. Social Security programs, specifically the retirement program, have long been considered a perilous “third rail” for politicians, meaning that if you tamper with the existing program you will get stung badly, and if you attempt to reform the existing program you may well die, politically that is. As a result, the retirement element of social security has been on virtual cruise control, occasionally modified to accommodate changing dollar values, but on the whole remaining in its original form. Recently, this element of Social Security has been brought under the full glare of the spotlight as the current President has made this one of his “hills to die on.” Everyone has finally admitted that the current system can’t sustain itself in its current form indefinitely, and though predictions of its insolvency vary, they come to the same conclusion: something must be done.

It would seem to me though, that before we try to fix what will soon be broken, we should make use of this opportunity to reexamine not just the structure of our program, but our underlying reasons for having the program at all. What purpose does social security play in our society, beyond redistributing money from the working class to the retired class with the promise that today’s working class will be replaced by a future working class that will fund their retirement? Or does it represent some other values we hold? An honest answer to these questions should be essential in order to shape lasting reform, for each may necessitate completely different plans. And lasting reform should be the key, so whatever plan arises should remain flexible enough to accommodate changing future demographics and attitudes towards national retirement programs.

Why do we even have a social security retirement system? The original reason for creating a national retirement program was simple- that generation of Americans decided that no citizen should have to continue to labor day after day to make ends meet after reaching a certain age. And further, that no citizen who had spent their productive adult years working as a member of society should have to worry about starvation or poverty once they became too old to work. The former is a tribute to our elders, a thank you for years of service and a chance to enjoy ones later years free from the daily grind of making ends meet. The latter is a security blanket for ourselves, ensuring that even if things go bad, we will always have something to fall back on. At the programs inception, many millions had lost their life savings, their jobs, their homes, or all three in the Great Depression. A nation that had enjoyed decades of progression towards a modern society was suddenly plunged backwards leaving whole areas in abject poverty. At that time, families and neighbors had to depend upon each other for survival, sharing the resources they could get, passing along clothes and furniture and the like, and dividing up the bread so that everyone got at least a little bit each time. Social Security became an extension of this attitude where everyone helped everyone else just a little bit so that no person went without at least the basics of life.

So if Social Security was designed to keep those at the bottom from falling through the cracks, how did it become the massive behemoth of entitlement that it is today? Was social security ever meant to be an unqualified payout, a reward for reaching the finish line in one piece? To the generation now coming into retirement age, the largest retiring generation in history no less, Social Security was sold just that way- as a reward for reaching the finish line. And to that end, it has been left to flounder about. After all, government promised them it would be there, so why worry about it? Somebody should have been worrying though.

Originally, the number of able workers paying into the system (once it was established) outnumbered those drawing out by something like 15 to 1. Such a ratio was more than adequate to fund retirements and build future payout reserves. As a result, Social Security was widely touted by those of the middle and lower economic classes as a future nest egg that no one could take away, something unknown to previous generations of workers. Then, society was still largely agrarian with more children per family, so who could have foreseen the trend towards urban living and smaller and smaller families, resulting in a shrinking worker/retiree ratio? Even as the situation became more apparent, the focus of social security remained entrenched in the attitude that those monthly checks were a right of birth and any kind of reform was framed from that point of view.

So at this moment of change, we need to ask ourselves just what do we want social security to be about? Do we want a system that promises everyone a guaranteed payout by age 65? Do we want a need-based system that just supports those who don’t make enough money to quit working at age 65? Do we want both? Ironically, the answer to how someone views social security can be found in the name they use to describe it. The words “social security” imply a kind of safety net, something to keep someone from hitting rock bottom. Increasingly, the current debate is being described in terms of “retirement accounts,” which imply a guaranteed pension of sorts, regardless of ones financial situation. Perhaps we are actually talking about two separate issues that have been rolled up into one.

Personally, I have no problems with a national guaranteed retirement program, provided it was equitably applied and designed to account for disparate earning potential. Designed properly, such a program could cover everyone and would alleviate an individuals concern about generating enormous hordes of cash in order to survive ones golden years. Such financial freedom could allow more people the opportunity to fulfill career paths that typically offer less financially but may be more personally rewarding. It would offer people the chance to switch careers throughout their lives without worrying about losing their retirement savings. It could be flexible enough to allow people to increase its potential themselves while strong enough to provide real security in later years without additional personal contributions.

At the same time, we must recognize that social security is a term for helping people through tough times, but not necessarily a means of long-term support. Social security should more accurately describe our efforts to eliminate poverty and hunger and homelessness among our working class and families. Describing this debate in terms of “social security” only clouds the matter at hand. It is a debate about funding our retirement, about who should pay the bill, and about who reaps the rewards of a lifetime of hard work.