A few weeks ago, presidential candidate and Texas Gov. Rick Perry called Social Security a Ponzi scheme and was labeled as a far-right extremist. While his choice of words was indelicate, Social Security is a deeply flawed system that will not exist in its current form for anyone in college right now.
Social Security payments account for about 21 percent of all government spending. Though its trust fund is not projected to run out until 2037, this figure is misleading because the government routinely borrows from the fund to pay for other budgetary items. In other words, if the bond markets ever decide to punish us for having such a high debt to gross domestic product ratio, Social Security Trust money is not as safe as it is purported to be.
When the program was started in 1935, citizens started receiving benefits at age 65, and the average life expectancy was 66. This demographic reality meant the program was essentially an insurance program against living much longer than the rest of the population. Social Security was able to pull countless seniors out of poverty and gave them the assurance that the government would help take care of them in the midst of a depression. If you judge a program by how well it achieved its objectives, this version of Social Security worked.
Now the average life expectancy is 77.8. Social Security has gone from an old-age insurance program to a national pension. Billions of dollars in taxes are taken out of productive use to be forcibly lent to the government so people who failed to plan adequately for their retirement can be taken care of.
Furthermore, Social Security is, indirectly, a wealth redistribution program from black males to white females. I use this example because, according to the Centers for Disease Control and Prevention, the average life expectancy for black males is 70.2, and for white females it's 80.6. White women can expect to collect hundreds of thousands of dollars more than other demographic groups because of their gene pool. Moreover, black males tend to be more economically disadvantaged than white females, making the payroll tax used to fund it quite regressive.
Social Security pays out disability claims on top of pensions. As I was flipping channels recently, I watched a woman on "Divorce Court" brag about how she made more money in child support and her son's Social Security disability payments than her husband did working at his construction job. While I was waiting to pick up a prescription at Walgreens, I discovered after chatting with a man in line that he was on full Social Security disability for a back injury he sustained in construction. Instead of working a less physical job, he is now on the government's welfare roll for the rest of his life.
In total, 8 million people receive Social Security disability payments. I find it hard to believe that even half of these people are so incapacitated that they cannot work in some form of a job. Besides disability payments, children of seniors receive hundreds of dollars a month just for existing. This path is clearly unsustainable.
Our generation must prepare for a lower standard of living because of the payments demanded by the generations above us. Eventually interest payments on the debt will force us to make hard decisions that won't involve elders alive today. The federal government currently spends $7 on the elderly for every $1 it spends on those under 18. This imbalance is pathetic.
America can continue to be the most powerful country in the world, but we must accept that attempts to promote equality limit future growth, lowering everyone's standard of living in the long run.
Regardless of if it means raising the retirement age, making participation in Social Security optional, or allowing some form of private investment accounts, something must be done so that our future government has money to pay for public goods besides drug benefits for Grandma.
Travis Hornsby is a statistics and economics senior. His column appears on Mondays.
