Writing in the Washington Postlast December, Professor Edward Berkowitz of George Washington University told readers that the Social Security system “is the nation’s best example of community” in which “one generation takes responsibility for the welfare of another in the full expectation of being taken care of in turn.” A day later, a member of the government’s Advisory Panel on Social Security told reporters that any proposal to allow American workers to invest their Social Security taxes in IRA-like personal retirement accounts would be a betrayal of the “community solidarity” embodied in the 62-year-old program.
What’s going on here? Is Social Security really an example of community? Probably not. Since paying Social Security taxes is compulsory, this notion of community rests on a legal requirement. But surely, there is more to community than merely complying with the federal tax code. Community and the bonds associated with it — love, friendship, trust and respect — all depend on willing participation. That is, choice makes these relationships meaningful. To assert that Social Security is an example of community is to misunderstand the idea. Community is more than just paying FICA taxes.
Nevertheless, Boston University Professors Eric Kingson and John Williamson tell us that we must value Social Security as “a source of national social cohesion and as an expression of the obligations of all to each member of the national community.” Two weeks ago, Sen. Harry Reid (D-Nev.) told his constituents that the Social Security system “promotes our national community” by acting as a “thread that binds each generation to the next.” Such claims not only abuse the idea of community but overlook an equally important point. The social bond being touted transfers our generation’s retirement burdens to unborn generations, side-stepping all questions of their consent and our moral authority to do so.
Fortunately, the idea of Social Security as community is not selling, even among Democrats. In a recent poll conducted by the Democratic Leadership Council, a group once headed by President Clinton, a near majority of Democrats, 48 percent, said they support “gradually ending” Social Security and favor “individually controlled private savings,” and 73 percent expressed interest in being able to invest some or all of their current Social Security taxes.
Perhaps they and other Americans favor privatizing Social Security because they understand that it will help the poorest members of their communities. Indeed, by making possible a much higher rate of return, privatization would raise the incomes of those elderly retirees who are most in need. For example, historical averages indicate that a young, low-wage worker who invested his or her Social Security taxes in a 50/50 stock-bond portfolio would receive 2.28 times more in monthly retirement benefits.
In addition, although the current Social Security system is ostensibly designed to be progressive — to transfer wealth to the elderly poor — the system actually contains many inequities that leave the poor at a disadvantage. For instance, differences in life expectancy among the rich and poor means that poor recipients receive fewer total Social Security payments. As a result, 53.7 percent of poor single-earner couples actually receive a negative return from Social Security: they pay more into the system than they ever get back. Under a privatized system, however, poor Americans would have full claim to their lifetime contributions and would be able to enjoy a more comfortable retirement.
Furthermore, any money remaining at death would become part of the retiree’s estate, inherited by his or her heirs. That money would go a long way in helping poor families raise themselves from poverty. It would also reintroduce capital into the poorest areas of the country, making more money available for new investment and job creation. For those reasons, Social Security privatization should be viewed as a boost to America’s poorest communities.
But every day that passes without reform diminishes the potential retirement benefits of poor workers. At the same time, thousands of new workers from disadvantaged communities enter a system that will ultimately deny them a secure and dignified retirement. It is a shame that false notions of community are used to justify this situation.