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How will the next President handle Social Security?
By Lauren | October 3, 2008
One of the ugly side effects of the crisis on Wall Street has been the ongoing tumble in the stock market. If you think that only affects high-rolling investors, think again. Most of the employee benefit plans in this country are deeply invested in equities, so a plunge in stock values can mean major pain for folks who are about to retire. According to AARP, about half of the equities in this country are in the hands of people aged sixty and older, most of whom have been counting on those assets to fund their retirements. If private pension and 401(k) plans continue to lose their value, Americans who are nearing retirement age are likely to be more dependent than ever on Social Security … which may be a very bad thing.
Social Security’s actuaries predict that the program is going to run out of money in approximately thirty years, unless immediate action is taken. (Where have we heard that recently?) In all likelihood, Social Security won’t come to a screeching halt on a particular day. Instead, politicians will juggle a variety of options to reduce benefits, increase contributions, and otherwise keep Social Security limping along, although the fact that $700 billion of government dollars are about to be tied up in the subprime mortgage bailout won’t make that any easier.
The ethical dilemma facing the next President and the Congress stems in part from the fact that Social Security isn’t just another entitlement program. Nearly all of the folks who expect to draw Social Security funds in the near future either paid into the program themselves or were dependent on someone who did. They (and their employers) contributed in good faith and with the full expectation that, when the time came, they would get the benefits they had been promised. And it wasn’t as though they had much choice in the matter; most people and employers are required to pay Social Security taxes by federal law.
Funding Social Security has been a major, unresolved issue in Washington for years. Would it be ethical for the next President to push for additional funding for Social Security when the government will already be groaning under a record burden of debt? Would it be ethical to cut the benefits of millions of Americans who contributed in good faith to Social Security throughout their careers? Would it be ethical to require Social Security to privatize, so that American workers are forced to put some or all of their benefits into the equity markets? Recognizing that the next President will already be facing an avalanche of challenges, would it be ethical for the next President to sidestep the problem, focus on other matters, and let future generations suffer the consequences of his inaction?
What’s your candidate’s position on Social Security reform, and are you okay with it? You decide.
Topics: For Actuaries, Presidential Campaign, Social Ethics, ethics |
October 6th, 2008 at 1:32 pm
Lauren,
I’m not particularly familiar with the way that social security works in the states, so I am not in a position to make informed comment on any specific changes the next president should make toward social security in your country.
The comment I will make however, is that your government should be managing its own fiscal responsibilities with much greater diligence. If the government is running unsustainable deficits now, what will happen in a couple of decades time when you have a greater number of retirees, far higher health costs and a smaller working population to pay for it all?
What the American government should do now is start managing its own finances in a semi responsible fashion and then work towards a situation where it can start to prepare for the challenges of an ageing population.