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March 04, 2011

Gather Ye Rosebuds While Ye May...

...Old Time is still a-flying.

And you'd better make sure that you're saving your rosebuds in some highly-diversified personal accounts, because if you're depending on Social Security, you're boned.

Karl Denninger over at the Market Ticker makes the same points I've made myself time and time again: Social Security is not an asset, but a tax; there is no "Trust Fund"; and the Federal Government can stiff you on your SS benefit any time it wants to (which, the way things are going, will be sooner rather than later). Denninger explains much better than I can how and why Social Security (and Medicare to an even greater extent) is completely broken in principle.

I do disagree with Denninger's statement that "[w]e can fix Social Security in part by indexing the retirement age upward." This is not a "fix", but simply pushing the failure further on into the future. Calculations of this type depend on the idea that we can accurately predict the economic future on time-horizons of decades, which we pretty clearly cannot. Mutatis mutandis, increasing the retirement age for SS will make it solvent for a longer period of time...but only if the future unfolds exactly as we expect it to. And only if the demographic makeup of the US stays in a net-positive growth curve. And only if our GDP and inflationary pressure doesn't change dramatically. And...well, you get the point.

I know that my constant harping on Social Security and Medicare seems like beating up on the old folks for something that isn't even their fault. But my point is a) that this crisis took root many years ago when current beneficiaries had a chance to change it, but chose not to; and b) that the current system is horribly unfair to younger people who have to bear the onerous burdens of this failed system at very little (or no) benefit to themselves.

Social Security and Medicare are unjust because they lay the responsibility for the failures of previous generations on young people who had no say at all in getting these programs established. There is no "fair" way to resolve this situation -- at some point, beneficiaries are going to have to accept that the situation is untenable.

But alas...no one seems to be much interested at present in hearing the bitter truth. Denninger's piece ends with a plain statement of this fact: "Resolving this problem cannot be accomplished within the current system, and that's a fact."

So where does that leave us?


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posted by Monty at 09:43 AM

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