June 4, 2005 | Commentary on Social Security
When I was forced to clean my room as a child, my mother would
often admonish me: "No one wants to clean up your mess." Now, in my
thirties, I'm faced with the prospect of cleaning up a far bigger
It will be us in "Generation X" and "Generation Y" (those born after the Baby Boomers) who will have to fix a financial mess bequeathed by our parents' generation. That's ironic, since Generation X is often unfairly tagged as a group of procrastinators and underachievers, compared to the Baby Boomers.
Previous attempt failed
We know that the previous attempt to fix Social Security in 1983
failed. It is still insolvent, and before long it won't be able to
meet its obligations.
Worse, Congress' solution in 1983 was to make younger generations bear the expense of "fixing" Social Security. Congress increased the retirement age from 65 to 67, but the increase wouldn't be completed for 40 years. This allowed Congress to cut benefits for Generation Xers, who were conveniently too young to vote then. Congress also raised payroll taxes to fund the Social Security trust fund, which has long been looted.
For Congress, Social Security is a spend-as-you-go program.
Assets in the trust fund are as a real as Elvis sightings and
consist of nothing more than scraps of paper in a filing cabinet.
The trust fund has no real financial value, which is why, in about
10 years, Congress will be forced to cut benefits, borrow more or
raise taxes to redeem those bonds.
Fixing the trust fund will become the first order of business for the Slackers (as Generation X is incorrectly called). Tax increases will fall heaviest on people born between 1965 and 1980, who will be in their peak earning years when money is needed to pay for the retirement of the Boomers.
Even if we can somehow repay the $1.7 trillion owed to the trust fund, the Social Security Administration warns us that Social Security would then still not be able to pay the benefits promised to many of the Slackers. This means that Slackers must again either pay higher taxes or have a sharp decrease in our Social Security benefits.
Actuaries estimate that we would need to increase Social Security payroll taxes by 16 percent just to pay for Generation's X retirement. That would be a $700 increase on the average worker earning $35,000. The problem gets worse every year. Generation Y will face even higher taxes or benefit cuts.
A solution for the young
There is a solution that would not subject younger Americans to
a continual cycle of higher taxes and fewer benefits. Personal
Retirement Accounts appeal to members of my generation.
The ability to control and own our retirement accounts seems like common sense to a generation of workers who have 401(k)s and IRAs.
PRAs seem more reliable than the current unsustainable system, which raised the payroll tax rate 13 times during the lifetime of Generation X.
Other solutions focus on "modest tweaks" - code for tax
increases - and benefit cuts. Most members of Generation X already
know we won't get all of our currently promised Social Security
benefits. What we want is the ability to control part of our
retirement through a personal account and not pay higher taxes for
When we fix Social Security, we should focus on solving its long-term problems. In the past, too many solutions have been the equivalent of stuffing all your toys in the closet. Slackers need to stand up and argue for a real, permanent solution to Social Security.
Otherwise, in 20 years, Generation Z will be blaming us for giving them an even worse deal than we got.
Rea Hederman is a policy analyst at The Heritage Foundation.
First Appeared on The Clarion Ledger.com