Social Security's Salvage Value; P.L. Poirot

The next point of the present story is that the current Social Security tax of 6 per cent, or $288, is 'scheduled for three more jumps between now and 1969, when it will be 9 per cent on the first $4,800, or $432 per employee. Any reliable insurance agent can tell you that would buy a sizable chunk of old-age insurance from his com pany-particularly if you happen to be a young person. 1 1 For a premium of $432 a year from age 20, a man can secure from private companies a life annuity averaging about $216 a month after he reaches 65. This is in contrast to the monthly bene fit of $127 promised through Social Security. 291 292 PAUL L. POIROT Short-Cha11,ging the Youngsters But that's the third point of the story. If you're buy ing Social Security, it's not a good deal to be a young person. In fact, it's an exceedingly raw deal, as indi cated in Actuarial Study No. 48 of the Social Security Adminis tration: The sum of the present value of the contributions to be paid under the present schedule [1956] by present members and the existing fund is $269 billion less than the present value of the benefits to be· paid to them and their dependents and survivors . . . On the other hand, there is a "surplus"

of $228 billion for new entrants. In layman's language, what that says is that the good old days of something-for-nothing from Social Security are drawing to a close, and that a "new entrant" (a young fellow at his first "covered" job) is going to help pay at least $288 billion more than he can ever expect to get back from his Social Security taxes. In other words, un der the 1956 amendments (aggravated in 1958, and likely to get worse with each subsequent amendment), the .new entrant can expect to pay a tax averaging about 8.3 per cent of payroll un til he retires, as against bene fits valued at 4.93 per cent of that same payroll. That is, the new entrant is scheduled to pay $1.69 for every $1.00 promised in benefits. At least, that's how the actu aries of the Social Security Administration figure it and it's not their business to paint the picture· any worse than it is. The lead editorial in Barron's of January 4, 1960 car ried this brief review of the program: SOCIAL SECURITY'S SALVAGE VALUE 293 Since Social Security was launched in 1935, benefit payments have increased sharply. Group after group has been added to the rolls, age limits have been lowered, and eligibility broad ened. In 1956, Congress extended coverage to a whole new class of recipients, the disabled. Today, 13.4 million Americans are receiving monthly checks, which for the year just ended, totaled $10 billion. Nor will the process stop here, since. the number of beneficiaries is mounting steadily. What's more, Congress is toying with dozens of ways to broaden the pro gram. Some legislators would reduce the age of eligibility from 65 for men and. 62 for women to 60 (or less) for everyone.

Others would lower or eliminate the minimum age of 50 for payments for disability. Still others would· boost all benefits by 10 per cent. Finally, Rep. Aime Forand (D., R.I.) proposes to add "free" medical, hospital, and nursing-home care. This modest proposal, by government estimate, would cost over a billion dollars in the .first year, and far more thereafter. The bitter truth, which any conscientious parent should want his children-as well as his congressman-to understand here and now, is that Social Security has been tried and found wanting. The facts developed in these first 25 years under the program make abundantly clear what could have been known from the beginning: the only way the government can provide a windfall for the oldsters is to fleece the youngsters. With perhaps a few rare exceptions, the point already has been passed for entering the program with the chance of getting back as much as one puts into it. Nor is there the slightest political possibility of a soundly funded government insurance program that could give any other result.

As long as it afforded a chance of something-for nothing, Social Security had its inducements for "prac tical" persons with no guide other than that of crass 294 PAUL L. POIROT materialism. But, with that powerful inducement now wiped out by the soaring schedule of taxes, it should be easier for everyone to understand why the program was doomed from the beginning by its compulsory and immoral features. The immorality arises, not in freely giving of one's own to assist the needy or the aged, but in the coercion employed to make others contribute. The lesson Social Security offers is that a morally defec tive procedure eventually must prove to be both eco nomically and politically unsound. If the youth of America will learn that lesson, it could be a vital salvage -their most important benefit-from the Social Security burden thrust upon them.