Quote Of The Day
This one is from Paul Krugman, whom I’m not usually a fan of, but even a stopped clock is right twice a day!
Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).
He wrote this in 1997. My generation, here in 2012, is most certainly going to get less than we put in, and that’s in nominal terms, not real terms! From the linked article:
Indeed, the entire premise of the Social Security system is that Americans will continue to innovate and the economy will grow so that the current generation of workers will be able to fund current retirees’ benefits. But because of shifting demographics and the added stress of the recession, when the baby boomers begin to retire in 2016, the benefits being paid out will start to exceed the amount being taken in. After the trust fund is depleted in 2037, beneficiaries will be able to receive only what current workers are paying in, which will be about three quarters of the scheduled benefits, unless changes are made.
Great, so I will get $.75 for every $1.00 I put into it? What a deal! I love knowing that I’m making a negative interest loan to the federal government!