Monday, March 27, 2017
Neil Buchanan (George Washington) presents Social Security is Fair to All Generations: Demystifying the Trust Fund, Solvency, and the Promise to Younger Americans at UC-Irvine today as part of its Tax Law and Policy Colloquium Series hosted by Omri Marian:
The birth of the Baby Boom generation created a profound policy challenge for the Social Security system: Should the system continue to be run as a pay-as-you-go system, or should the large new cohort of workers be forced to save for their own future retirements? Although the outward structure of the Social Security system was not changed, the Baby Boomers were, in fact, required to save for their own retirements. They did so by paying higher taxes than would otherwise have been necessary, thus contributing to total national saving in a way that allowed the economy to grow more quickly than it would have otherwise. In turn, Boomers bequeathed to their children the economic wherewithal to support their parents in retirement, even while the post-Boomers will enjoy higher living standards during both their working lives and in their retirements. It is possible, however, that this supposed generational sacrifice was illusory, that the Baby Boomers were otherwise impoverishing their children and grandchildren, even as they paid extra money into the Social Security system each year.
Fortunately, the evidence shows otherwise. Even the most pessimistic economic assessment of Social Security’s cost to future generations shows only a trivial effect on the path of increasing national income, and there is no suggestion at all that Social Security’s decades of surpluses were the cause of any other changes in fiscal policy that would have had a negative impact on future generations. Although the Baby Boom generation can rightly be accused of making many mistakes that have harmed their children and grandchildren, the Social Security system is most definitely not one of those mistakes. It is a triumph of political propaganda that the one thing that the Baby Boomers did best is now so badly misunderstood that it has become the symbol of a generation’s failure. The Social Security system does not need to be fixed, because it is not broken, and if left alone (or, even better, if it is expanded), it will continue to do its job well.