Occupy Wall Street and Social Security

The #OWS crowd doesn't seem to have coalesced around a coherent list of demands, but given the number of young people involved in the protests, I wonder why there aren't any demands for its reform. Consider the burden the young face, when they eventually get jobs. This chart is from the federal government's Social Security Administration, so it certainly does not overstate the problem.


The chart is actually misleading because it should use a log scale to express these ratios. The drop from 3:1 to 2:1 is what leads to this situation:

The Long-Run Financial Outlook

Social Security is not sustainable over the long term at current benefit and tax rates. Beginning in 2010, the program is projected to pay more in benefits and expenses than it collects in taxes each year. By 2036 it is estimated that the trust funds will be exhausted. At that point, payroll taxes and other income will flow into the fund but will be sufficient to pay only 77% of program costs. As reported in the 2011 Trustees Report, the projected shortfall over the next 75 years is 2.22% of taxable payroll.

So a twenty-something protester who starts working can look forward to significant increases in their payroll taxes, or inflation eroding their earning power as the federal government borrows more heavily to sustain benefits. If we don't act soon the electoral possibility for reform becomes grim. From Holman W. Jenkins.

We've mentioned before Henning Bohn, an interesting University of California at Santa Barbara economist, who argues that, precisely because of these demographics, a median-age voter in successive future elections will rationally vote for higher taxes in order to secure his or her expected Social Security and Medicare benefits.

This is one of the biggest dangers to our continued future. The demographic trends, coupled with current policies are turning the entire country into welfare dependents, or at least a large enough proportion that it skews elections. This is why I am adamant that we need to raise the retirement age now, as well as to start means testing social security. Those two actions will effectively reduce the numbers of seniors who are receiving social security, making further reform more achievable.

Who is going to push Mittens into proposing a real social security reform plan?

To be fair, here is what Romney has said.

“There are one of two ways you can make Social Security work forever.

“One of course is to raise the retirement age by a year or two,” said Romney. “The other is having slower growth in inflating the benefits of higher-income of Social Security recipients. Again, not current recipients but those in their 20′s, 30′s, 40′s and early 50′s.

“Those combined, represent the best course for us to be able to permanently solve our Social Security shortfall,” said Romney.