I thought I had come up with a great analogy for Social Security: It is a ship rushing towards an iceberg, but that berg is very far away and a simple and small course correction is all that is required to avoid disaster. But, as expected, the fundamental disagreement with my conservative friends is not tactical, it is strategic. I got a response that went something like this: “The Social Security fund is projected to run out of money in my lifetime, and I don’t have any faith that I will be able to collect anything close to what I put in. If they would give me my actuarial benefits today, I would ever so gladly take them and invest them myself.”
We haven’t yet gotten to the core issue, but nonetheless it is useful to address this common complaint. Social Security is an insurance program, not an IRA. My friend doesn’t want insurance, he wants an IRA. Fair enough. But let’s not say that Social Security is broken because it is insurance, not an individual retirement account.
I have fire insurance on my house. I will be very, very happy if I live out my days never having to collect on that policy. Does that mean all those premium payments have been a waste? No. That’s the nature of insurance. Likewise, Social Security is insurance against poverty in retirement. I hope that I will never need it. That will be success for me. But for 40% of people in this country aged 65 and older, social security is their only income. They need it. I’m glad they have it. My friend and I may be better off with an IRA, but they wouldn’t be.
The whole discussion about Social Security as a sinking ship is a ruse. The course corrections required to avoid disaster are simple and relatively painless – and such corrections from time to time are inevitable for all such insurance programs. But by saying we need to get rid of Social Security because it is broken, one avoids having to debate the true issue: My conservative friends want to get rid of Social Security even if it is not broken. The philosophical/policy issues involved are fundamental and worthy of debate (properly balancing individual versus shared risks and needs), but instead we argue around the core issue. That’s a shame.