COMMENTARY | Do you love Social Security? Apparently most Americans do, because it's considered the "third rail" of American politics: touch it and you die. We Americans love Social Security because it provides income for life and cost of living increases (your 401K can't do that), and it's guaranteed by the government and isn't at the mercy of the stock market or the high fees of Wall Street "fat cats."
But, alas, like the beauty you met in the dark bar last night after your 10th beer, Social Security doesn't look so good in the sobering full light of day. It's expensive, consuming 12.4 percent of every worker's compensation, yet still underfunded and is projected to lose $45 billion this year alone.
This means to keep benefits flowing, the government will have to borrow money, raise taxes even further, or cut benefits. And what will most of us really get out of Social Security? The average recipient currently receives just over $14,000 per year in benefits: hardly enough for a secure retirement.
But like an inner city child trapped in a failing public school, no matter how much you might benefit from opting out of Social Security, you can't. It is compulsory. Social Security's supporters take comfort in the fact that it is a program of the federal government, with the stability and predictability this implies. But in reality, governments can and do change their promises when it is convenient to do so. Consider the history of the Social Security tax, which began at 2 percent, was promised to never rise above 3 percent, but today stands at 12.4 percent.
Although it will be difficult for us to end our love affair with Social Security, we cannot continue indefinitely in what has become a dysfunctional relationship. The sooner we make true reforms which preserve the positive elements of Social Security but provide greater freedom of choice and higher returns, the better off we will all be.
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