What If Social Security Will Not Let You Go

I would probably agree with the author, with one significant caveat; what will it cost to settle Social Security’s claim on me.  If I settle, I want some kind of assurance that I will not be dragged back into the system as it returns to failure on even worse terms.  (See Plan)

The only issue that I have with the plan is that it cures the symptoms of Social Security.  70 years of gross financial mismanagement have resulted in a 17.9 trillion dollar shortfall.  This plan makes a significant step to resolving the shortfall.  The problem is that the plan does not change the existing system in such a way that the next 70 years will not mirror the last 70 years.

If that failure of common sense repeats, the traditional Social Security system will be in as much trouble in the future as it is today.  What happens if Social Security collapses in 20 years after most of the younger workers have left?  As people leave, the system will have fewer resources on which to draw to pay benefits to existing beneficiaries.  If the system cannot be sustained, will the government simply look for a moral obligation to take care of the people who foolishly trusted in the system?

The workers of Galveston County are a good example of this problem.   The workers of this county left the Social Security system in 1981.  They were told that they wouldn’t pay into the system and they wouldn’t collect from it.  The fact is that they do pay into the system.  In the mid-1970s, the government created the Earned Income Tax Credit to help offset the high cost of payroll taxes for low-wage workers.  This is a direct subsidy to the system from the general taxpayer. Now the general taxpayer is financing the payroll tax holiday.  Who is the general taxpayer?  In part it is the workers of Galveston County.

While the number of workers who work for Galveston County is relatively small, they represent a much larger group.  Millions of Americans have no stake in the success of the system, but they are now highly invested in its failure.  The trend in Social Security reform is to push the burden of the system onto the general taxpayer.  This is the ultimate in universe expansion.  This step increases coverage to people who can’t collect from the system. 

Any plan that divides the retirement system will have this problem.  Ron Paul’s opt-out plan has similar issues.  It enables younger workers to opt-out of benefits.  It preserves benefits to older workers.  The ultimate source of that money is the general taxpayer.  Who is the general taxpayer – well it is many of the people who ‘opted-out’.  What these younger workers will find is that they only opted-out of the benefits.

You may well decide that you want out, and will take the risk that Social Security will not let you go.  That is a risk that you should consider.