Monday, June 27, 2005

Social Security Transition Costs

My friend Dobber offered an interesting post on Social Security on his Dobber's World Bog a little while back. In the comments section Travis asks the question,
Why is SS necessary? SS was a socialistic (mandatory) pyramid scheme set up
by FDR. Before that people seemed to get along nicely without it.
That may be, but it got me to thinking about the social contract that we have now that Social Security has been in existence for three generations. Specifically we now have a very large transfer payment scheme set up so that a portion of each worker's income supports a retiree, who has previously contributed to the program. Each generation contributes to the wellbeing of
their elders with the assumption that Social Security will provide for their wellbeing in retirement, paid for by the output of a future generation of workers.

Getting back to Travis' comment, how did people get along without Social Security? Well it is pretty much the same model as Social Security except that there was no government intermediary. Each worker supported not only their children but also his parents and expected his children's support in old age. Is it possible that Social Security has actually weakened the extended family and substituted the State in its place?

That is one of the messages that I took from this article by Rachel Reynolds in Notre Dame Business. Although Rachel's point is that Social Security indirectly benefits even those people who have no chance of directly benefiting from SS (through supporting their parents and grandparents) the fact remains that the existence of a massive state sponsored program has changed this country's social fabric. An interesting question is, is it possible to go back? Is it possible for people to be responsible for themselves and their families without the government intervening? Is there some level of poverty that we, as a society, are not comfortable accepting? And is that a problem best solved at the local, federal, or state level?

Just some of the questions that I have been thinking as we hope to have an honest conversation on this topic.

1 comment:

DOBBER said...

I must think more about this, but as a rule of thumb, i tend to think that any state program that "takes care of" a certain section of people will cause people to be more dependant on the government and less dependant on people. I assume anyone will see the inherent flaws in that shift.