From: utzoo!decvax!harpo!duke!bcw Newsgroups: net.politics Title: Re: Social Security Article-I.D.: duke.2937 Posted: Sun Jan 23 15:30:54 1983 Received: Mon Jan 24 07:29:33 1983 From: Bruce C. Wright @ Duke University Re: Social Security Strictly speaking, Social Security is *not* a pyramid scheme as such things are usually constructed. A pyramid scheme *requires* that the pyramid keep growing in order for the system to work; this is not the case with Social Security (you can imagine situations in which Social Security would work: steady population cohorts, static medical technology, and so forth). Unfortunately, the nation is not standing still (this is always a problem for the government to handle since they find it difficult to deal with a changing environment). The population cohorts are changing all over the place (the 1946-1955 cohort is larger than the ones before or after, abut thw 1976-1985 cohort looks like it will be larger again). This means that there will be distortions when the larger cohorts retire. Secondly, medical technology is progressing rather rapidly; the average life expectancy has increased by around 10 years since Social Security was initiated. When Social Security was started, the marginal life expectancy was only about 5 years after age 65; now it is over 10 years, and many more people are making it to 65 than did when Social Security was started. This tendency shows every sign of continuing and perhaps even accelerating. Thirdly, people are retiring earlier than when the system started. When the system started, benefits could not start before age 65; now benefits start at age 55. The basic problem is that there is tremendous pressure on Congress to add benefits but not much pressure to stay within the system's means. In order for the system to stay solvent indefinitely, it will have to be indexed to population and technological dynamics (which will mean raising the minimum benefit age, not a politically popular move). A large part of the problem occurs because of the anti-savings bias of the government tax system (and we wonder why the US capital supply has been drying up...). Unfortunately, as long as all of the different special interest groups (Defense department, Welfare programs, etc, etc ad nauseum) continue to demand so much money and Congress is willing to cater to them for their votes, there isn't much that can be done about that problem. It probably isn't a good idea for *anyone* to rely on getting a single dime out of the system if you're under about 50 - I wouldn't be at all surprised if the above problems didn't exacerbate the system's financial status so badly that it goes broke by 2000. The current "fixups" will only keep it going until 1990 under fairly optimistic assumptions - not anything you'd want to stake your life on. Bruce C. Wright @ Duke University