Is Social Security a forced retirement program?

A couple days ago, Senator Ron Johnson (R-WI) called Social Security a 'forced retirement program' and said workers' payroll contributions should be gambled on Wall Street. My senator, Sheldon Whitehouse (D-RI) proposed adjusting the payroll wage cap so that people making over $400K per year begin paying their fair share — a "win-win."

Let’s take each of these in turn:

1. No, Social Security is *not* a retirement program. It is retirement insurance. Retirement programs include such things as 403b and 403c plans, 401k plans, IRAs and personal savings. In all these plans, money is invested in the name of the person to become available to that person upon retirement. There is no personal Social Security account for each worker. Social Security is a pay-go program, where current workers are paying the benefits of current retirees (pace the Trust Fund). 

For many Americans, Social Security is the only thing keeping them from living under a bridge eating cat food. Yes, it’s forced *insurance payments* if you have a salary. Coerced payments in exchange for benefits is not unique to Social Security. Almost all U.S. states force drivers to carry liability insurance. The exceptions are Virginia, which forces uninsured drivers to pay a $500 fee, and New Hampshire, which forces drivers to prove financial responsibility if they are in an accident. Of course, you can avoid these coercive laws by just not driving.

2. Raising the payroll cap without raising the benefits turns Social Security into a welfare program. And we know that welfare programs become the perennial whipping boys in Congress whenever the borrow-and-spend policies of the GOP are discussed. This is a bad idea.


We know what the alternative to Social Security is. Before the Social Security Act of 1935, roughly one-third to one-half of American seniors lived in extreme poverty. During the Great Depression, many older adults lacked savings, and reliance on family was common, with poverty rates for seniors likely exceeding 50%. Today, less than 10% of seniors live in poverty.

 

If nothing is done, Social Security benefits will shrink by about 22% by 2033. What needs to happen is to raise Social Security taxes paid by current workers so that their Social Security retirement insurance benefits remain available when they reach retirement age.

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