By now, many of us members of Generations X and Y -- people born between 1965 and 1984 -- know that Social Security's future collapse will harm us, not our parents or grandparents. That harm appears unavoidable; past failures to convert the program into a workable system and present politicians' desire to demonize reform proposals for political gain have cast a dark shadow over our retirement years. But, even though we may not be able to escape our economic fate, we Gen-X and -Yers still have urgent reason to push for Social Security reform now because our children's economic future hangs in the balance.
How can reform decisions made today affect a generation that largely has yet to be born? Because Social Security's design allows present generations to award themselves benefits that will be paid for by tomorrow's workers. For example, the program's current "trust fund," which is intended to cover the retirement of the baby boomers (born between 1946 and 1964), began growing when the first Gen-Xers entered the job market, just after the boomers and older generations raised the FICA and payroll taxes that fund Social Security. Unfortunately for us Gen-X and -Yers, the older generations also agreed to benefit levels for themselves that will empty the trust fund by the time we retire. Thus, after a lifetime of paying Social Security taxes, we will reach our senior years only to discover that the program has no savings for us.
Of course, our economic future does not have to be that way. We could protect our Social Security money by privatizing it (or, at least, a portion of it) -- that is, by making each of us the private owner of the money we pay in. We could even have the freedom to invest that money if we wanted to, in the hope of making it grow so we would have a more comfortable retirement than what the program now offers. But some politically powerful members of the older generations oppose privatization and the freedom to invest because those features would keep the older generations from emptying out the trust fund.
Now, some of those same people are trying to convince us Gen-Xers and -Yers to do the same thing to our children that the older generations did to us. They recommend hiking our children's FICA and payroll taxes and instituting massive government borrowing that our children - and their children -- will have to repay. The infusion of cash from higher taxes and billions of dollars in loans would ensure that the trust fund would not be empty when we Gen-Xers and -Yers retire. But it also means that our children, after a lifetime of paying even higher Social Security taxes than we did, would inherit a trust fund that would not merely be empty, but would be in heavy debt.
Why would members of older generations recommend such a plan? One reason may be because the boomers could benefit from increased Social Security taxes on our children and additional government borrowing. With the trust fund temporarily revitalized by cash from new taxes and loans, they could demand an increase in their benefits - even though the money would still run out sometime in the future. In a move befitting an Enron executive, they could pad their retirement by mortgaging our children's future.
Generations X and Y may not be able to avoid Social Security's future collapse, but we can keep our children from a worse financial disaster. Even if we have to pay a steep financial price, we must reform Social Security so that workers and their families have ownership over the money they pay into the program, and so that one generation cannot benefit by taxing and bankrupting their children and grandchildren.