30 November 2006

What Nobody Says About Social Security

One of the reasons that social security is projected to be a problem is that our population is aging. This problem of more retirees per working person is even worse in places like Italy and Japan. Whereas as one point about 7 - 10 people all chipped in to fund the social security payments of the retired, the projection is that once baby boomers retire the ratio will be more like 4 - 5. Obviously this strains the system.

But system boundaries can be redefined. If you instead define the problem of one of working to non-working population, the problem is less onerous. It is not just those over, say, 65 who working people have to carry; they also carry those under, say, 20. It is worth remembering that as the number of children drops, the ratio of working people to children will raise. If at one point there were about 4 - 5 working people chipping in for the schooling, etc., of every minor, the projection is that it'll be more like 7-10 in the future.

Looked at as a problem of working age population to not-working population (a group made up of school-age children and Winnebago-driving seniors alike), the problem is easier to solve.

(Blogger's note - I'm quickly writing this note in between breakfast and the start of my work day. My researcher has yet to show up for work (and I'm not sure what year they are scheduled to start but apparently it isn't this year), so the numbers I've used are for purposes of illustration only and would match reality only by coincidence. Further, the cost of funding retirement is greater than the cost of funding schooling, so the ratio doesn't have to neatly flip in order for the funding to neatly flip. The point is, you get the point.)

Conservatives don't point this out because they don't want to save social security. Like a man who doesn't wake up his wife in a house fire - not because it would have been too dangerous but because he already had his eye on a younger, sexier wife - conservatives are hell-bent on private accounts (a bad idea that deserves its own posting).

Liberals don't point this out because it suggests shifting money from education to retirement, a budget change that sounds like they're giving up on the future - or at least it sounds like they are giving up on the teacher's unions, one of their stronger supporters.

1 comment:

Dave said...

Your idea is attractive, though I see a structural problem beyond the initial question of whether the dollars "flip" as you put it.

Social Security is funded by the feds after they take it from the working population by taxing income. Education is funded by state and local government in the form of property taxes, for the most part.

State and local governments are unlikely to reduce property taxes and give the income source to the feds for Social Security, rather than diverting it to other local spending, even if they realize the money isn't needed for education.

Even if they did, the feds are seemingly incapable of refraining from diverting money from the Social Security "trust fund" to mask the debt they are piling up by other spending. I don't think they would be any more responsible with a new source of income.

Still, as I said, an attractive idea.