Gen-X Viewpoint

[Michael Jones <powderfinger99@yahoo.com>]

First, thanks for providing this forum.

I wanted to provide a younger workers viewpoint on Social Security
reform. It is the younger workers, and more immediately, the baby
boomers, who will be most affected by the systems problems.
Unfortunately, I think most younger workers do not consider this
issue as important to them as others.

The Social Security problem can be summed up very simply for younger
workers: their "return" will be negative. It is very easy to
communicate it this way:

Imagine if you put $10,000 in the bank (risk-free) for 40 years.
At the same time put $10,000 into the Social Security system.
Through the magic of compounding, the money in the bank might be
worth $30,000 after 40 years. According to information provided by
the SSA (using my PEMA statement), the $10,000 dollars will be
worth about $9500.

Even the $9500 (or -1% annual return) final value makes a big
assumption that the current system remains solvent. If changes are
made to the system to bolster its solvency, it will likely mean an
even lower return for the younger worker.

It is easy to see, from the example above, why younger workers are
cynical about the Social Security program. The real problem with
Social Security is that it is trying to solve two problems which
should ideally be accomplish by separate programs.  The result is
that the program does not accomplish either goal well.

The program is typically sold to the electorate as follows:

1) A retirement system. Benefits are based upon contributions.
2) A social program to assure a minimum retirement income.

These two goals cannot be simultaneously accomplished by the current
program because they require separate solutions.

* A successful retirement program should be composed of individual
accounts which hold assets which create and compound wealth. The
bank account above is an example of such an account.

* The second goal will assure that every worker gets a minimal
retirement income that is guaranteed, regardless of working record.
If the worker earned low wages during his lifetime, the system will
provide a minimum benefit to try to keep the worker out of poverty.
In order to provide this benefit, the government must redistribute
money from other tax payers.

Both of these goals are worthy. The current system however, provides
neither a good "return on investment" or an above poverty-level
benefit. There are not too many people who do well with the current
system.

I believe a dialogue needs to be started to talk about what Americans
wants the current system to do. I can live with the fact the current
system will provide a poor return, as long as the political
establishment "sells" Social Security honestly as a "social welfare"
program. If the political establishment wants to sell this program
as a "retirement system", it should provide private individual
accounts that yield market rates of return. Only private individual
accounts which build wealth are suitable for a retirement program.

Another solution is to create two programs to accomplish both goals.
The "social welfare" program would be funded out general revenues,
while the retirement program would be setup using private firms.
This structure could provide needed accountability, which is not
present in the current system.

So, what's it going to be? What do you want this program to do,
America?

Michael Jones