By: Mary Mostert, Analyst
August 10, 1998
President Clinton has been trying really hard to pick a fight with the Republicans over Social Security, we were told over the weekend. Apparently the president believes that the American people are going to rise up and fight Gingrich and the Republicans if the DARE try to reduce taxes on the much beleaguered middle-class families.
Somehow, I'm finding it hard to believe that. I can't recall in world history one time when the populace rose in revolutionary fervor to protest someone suggesting a reduction in taxes.
However, that is what we have been told. At issue is how much money will be put aside for Baby Boomer Social Security. Newt Gingrich says projected budget surpluses over the next decade should be used to cut taxes by $700 billion and to strengthen Social Security with another $700 billion.
Gingrich says if Clinton and Democrats continue to fight a big tax reduction, Republicans will happily use that against them this fall.
"The president will decide how big the campaign issue by deciding how big the tax cut," Gingrich told reporters on Friday. "If he accepts the entire tax cut, it will be gone as a campaign issue. If he doesn't accept the tax cuts, it will be right there on the front burner as a clean, decisive choice this fall."
Last winter Clinton's simultaneously urged that the nation "save Social Security first" by preserving budget surpluses until Social Security's long-range fiscal health is ensured, while asking for billions more public spending in the budget for various new and improved entitlement programs. He warned that he would accuse anyone looking to use the surplus this year of looting the government's most popular program -- a warning he served again last Thursday.
"I don't want us to run right out and spend it before we take care of the crisis in Social Security that is looming when the baby boomers retire," Clinton said.
This isn't going to be a popular thing to say, but isn't it about time to discuss exactly what social security was designed to do? It was not designed as a personal retirement plan. When it was begun in 1936, after much heated debate, it was assumed that, in large measure, the younger generation's contributions would support their parents. It would be a government version of what was routinely happening in society - children cared for their parents in their old age.
Children, in almost every culture on earth, have always been considered the social security for their parents. Many children meant a comfortable old age. No children, or only one or two children, meant danger that in old age the parents might suffer.
The Social Security Act of 1935 started the United States on an extensive program of social security for people. It had two main parts: Unemployment insurance, which as a Federal-state program and Federal old age and survivors insurance. It didn't cover farm workers, domestic workers, doctors, lawyers and dentists. Obviously, those old enough to begin drawing the old age pension in 1936 had not contributed much, if anything, to the new program. Their pensions were paid by the younger generation - the Depression Age group, of which I am a member.
That first group of old-age recipients had fought World War I, and most of the Depression years. When the program was passed, it was because that group, having faced serious physical and financial problems were getting to an age where they could no longer do the mostly hard physical work required of most workers in the 1930s-1940s. Since the average life span in the United States in 1936 was 59 years, and the retirement age was 65 years, quite a number of the people who paid into it never received a dime. My mother was in that category. She paid social security from 1936 until her death at the age of 51 in 1954.
The latest life expectancy announced was 76.2 years - and the retirement age has remained at 65, only somewhere along the line it became possible to retire at 62 --and the type of work being done by the average American worker no longer is Backbreaking physical labor. If the same ratio to lifespan was used today that was used in 1936, the current age of retirement would be about 82. Many jobs in the marketplace today can be as easily done by an elderly worker as by a young worker. Furthermore, the baby boomers have never faced a war or a depression, they have fewer children, make more money and, frankly, they ought to be salting money away for their own old age. The majority, in fact, is doing so. That probably the reason why the stock market is determined to go up regardless of what is happening elsewhere in the world.
The parents of the baby boomers, who are generally over the age of 65 today, are not apt to have any problems with their pension - simply because, collectively and individually, they had a lot of children. And, the social security system that started out as 2% of income is now 15% of income, with the employer paying half and the employee paying half. If Democrat Congresses over the last 40 years had kept their hands out of the Social Security money, there wouldn't be a problem. What Gingrich wants to do is start putting that money back in, but still give the middle class a tax break.
Of course, the other part of the problem is that people are IN it longer than originally expected. While my mother died at age 51, my children's paternal grandmother died at age 97, have begun collecting benefits after only 5-6 quarters of payment into the system. Social Security was designed to help the elderly poor. It has become a fund that pays many seniors to travel or to have a summer home and a winter home, because they did not rely solely on Social Security for their senior years.
So, looking at it in light of the fact that the problem the baby boomers have is (1) They had small families, or no families, and (2) they were not kept from economic advancement by war or depression. Are they really a group that needs to be on the public dole? They don't. One of my six children does not have children. He does, therefore, have a lot more money to invest than his brothers and sisters who have four to six children each.
Should I worry about Gary's old age? I don't think so. Furthermore, I really doubt that Bill Clinton or anyone else would be able to stampede Gary over whether or not he will one day collect an old age pension from the federal government. He doesn't need Bill Clinton as a baby sitter.
The real problem, of course, comes from the fact that, while the average American is living longer each year, the Average American also has concluded he ought to be able to retire early - perhaps 55. As the life expectancy continues to rise - and some have said that living to be 120 may be common in the very near future -the baby boomer generation should give up the notion that they ought to be able to live longer in retirement than they lived in the work force. Since they chose not to have children, and the whole Social Security system was designed as children caring for their parents, they don't have the same need for a government Social Security system that the World War I generation had.
While today it is not uncommon for seniors to live well beyond 35 to 40 years after retirement, the system was originally planned with the knowledge that few in the population would live beyond the age of 60 - that most people collecting social security would only live 2-4 years beyond age 65.
What happened to the system? Politics happened to the system. The kind of politics we are now about to see again.
The baby boomers are the first generation that had so few children that the insurance aspects of social security don't work. Either that generation needs to make better investments in the social security money, which would mean that Clinton should give up his plans for billions of new entitlement schemes, or they need to plan on a much later retirement than 65 years.
If there were no social security in existence, the present system is about the last thing the baby boomers would have chosen - since they have had so few children. If Social Security were taken back to its roots - a safety net for the elderly poor rather than a slush fund for retired snowbirds with two nice homes, - this generation probably would demand that the government stay out of their investments and cut the public part of the system back to 1-2% of income.
Of course, that might ruin Bill Clinton's plans to once again scare the daylights out of the seniors so more Democrats would be elected to Congress in November.
To comment: mmostert@waveshife.com