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Wednesday, September 22, 2010


Social Security

On page 171 in the appendix Olson states, “But even a project that involves more gain than cost will leave more losers than gainers, if the gains go to a minority of those in the jurisdiction and the cost is covered through jurisdiction-wide taxes. When a collective good reaches only a minority of those in a jurisdiction, then, it will not get majority support, and will be provided, if at all, only to a less than optimal degree.” The first thing that came to my mind when reading this was Social Security taxes. Social Security is a nation-wide tax that we must pay for someone else’s benefit.

We pay these taxes out of every paycheck which then immediately go to the minority who receives it. Why must young people continue to pay Social Security to benefit this minority? After all, when young people retire, there will be no Social Security for us and there will be no one paying taxes for our benefit. We will be the minority in the future, but yet will be receiving no similar benefit for which we pay for the current minority. There will be nothing left in Social Security! What about the future and retirement of young people? Why not let younger workers contribute to their own Social Security which will allow us to invest our own funds for retirement?

Even if government raises Social Security taxes to support the current benefits of the minority, it will still be broke by the time we should be receiving the benefits. Why should we support and benefit the current recipients if no one is going to support us (especially with higher tax rates)? This benefit is provided to a less than optimal degree as Olson suggests. Social Security costs more than the taxes collected. As we move forward, the retirement age will be increased, as well as the tax rate with a higher cap of annual wages, or even no cap on wages at all. Even as this happens, the amount of Social Security benefits will decrease to each recipient, and may not even reach the total amount of retirees.

We should be allowed to put our own Social Security taxes into our personal investments and accounts for our own retirement – not someone else’s retirement. Why are we relying on the government and expecting government to provide us all retirement benefits? We all know that the young workforce will never see the benefits we paid so much for!

Here are some poll results:
• More than 88 percent of Americans believe that Social Security either is in trouble today or will be in trouble within the next 20 years. Fully 60 percent of all Americans under age 65 believe Social Security will not be there for them when they retire.
• As a result, more than two-thirds (69 percent) believe that Social Security will require "major" or "radical" change within the next 20 years. Among younger voters, approximately half believe that major or radical change is needed today. The support for change cuts across ideological and party lines.
• Voters reject most traditional Social Security reforms such as raising the retirement age, raising payroll taxes, or reducing benefits.
• Approximately two-thirds of voters would support privatization of Social Security, transforming the program into a privatized mandatory savings program. More than three-quarters of younger voters support privatization.

Although this might relate better to another one of Prof Eubanks classes, the increasing taxes to support social security will lead to people finding ways not to pay these taxes. The workers are paying into a system that is clearly going to fail sometime in the future, so the incentive to not pay into the system is very high. I am sure that more "paid-in-cash" jobs will emerge, or at least become more enticing. Government intervention leading to increased crime, prohibition anyone?
Perhaps you've missed an opportunity to apply the Logic. When you ask "why you should have to pay" for a minority, I think you are really raising the question in a normative way. On the normative concerns, I have explained to many that I think social security is intergenerationally unjust. But, the Logic is positive, not normative, and thus what I think you miss as an application of the Logic is to ask the positive question: Why do the politics of social security work out in such a way that it has been very difficult to change the system. At least part of the answer is hinted at with the Logic. The group you are a part of doesn't have an organization to politically promote your interests, or we might say the group you are a part of is a large latent group. On the other side of the issue is AARP, a well organized and politically effective group.
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