The Parent Trap

NOW COMES President Bush, with a proposal (the full details, as I write, are still undisclosed) to cut Social Security benefits and to establish, in partial compensation, a system of personal stock accounts into which payroll tax revenues could be funneled. This plan is being sold to young Americans as a way of making them "self-supporting." But the effect, in many cases, would be exactly the reverse. Under Bush's plan many of today's young working people, when they are old, will become financially dependent on their own kids.

Nobody would argue that those who currently depend on Social Security are rich—the average new recipient gets $895 a month. Bush's proposal would cut everyone's baseline benefits by decoupling them from average wage increases and linking them instead to cost-of-living increases, which are lower. Under present law, the elderly enjoy some of the wider economy's productivity gains; under Bush's proposal they would not, and baseline benefits would fall dramatically.

Bush claims that these cuts will be made up for by income generated by privatized Social Security accounts. But your return would have to beat 3 percent after inflation for you to come out ahead. Some might do so well, many would not; there is no guarantee that future stock returns will match past performance. On top of that, if private accounts permit investor choice, many will make bad or unlucky choices, and accounts will be depleted by fund managers' fees.

Even if the accounts don't permit choice, they will be subject to market timing. If the market tanks the day before you retire, you're screwed. This is not a minor consideration. As everyone has known since 1929, a market crash often precedes a recession—in which older workers especially are permanently displaced. Think of it as a double gift: First you lose your pension, then your job. Fun. Finally, private accounts can never provide for survivors whose parents die before accumulating a nest egg, or the disabled.

Bush's plan is a form of Russian roulette played with the lives, not of today's elderly, nor even those in late middle age, but of today's young Americans. Many of these future elderly will be thrown back on the mercy of their families. But the demographic realities have changed. The future elderly will live even longer than this generation, and their care will be more costly than ever before. There is no way in the world that their children will be able to support them, as Bush's family responsibility system would force many to do. Who, even now, has an attic where a mother-in-law could go?

The most likely consequence is death. The survival rates of America's future elderly—today's working young—would drop. For those seniors who have no families to fall back on, life will simply become nastier, more brutish, and shorter. And what about those whose families exist, but can't or won't do enough? There will be many. Even well-meaning families—as most are—will suffer torments of conflict and guilt as they try to make hard choices between their parents and their children. Will they choose the past or the future? The cruelty of family life under this scheme is hard to fathom.

Why aren't young people focused on this? Why do they only hear about the supposed "financing crisis" of Social Security? The answer lies in the propaganda and misinformation spread by those who would profit from changes to the system—fund managers who want the commissions and insurance companies who want to reclaim the market that Social Security took away long ago. President Bush's proposal strives to serve these supporters (and preserve his tax cuts)—it's that simple.

As for the so-called dependency ratio—the number of retirees per worker, another key indicator of "crisis" for the scaremongers—it's irrelevant. Yes, dependency is rising, and yes, that means that the burden of elder care falls on fewer and fewer workers. But whatever the economic consequences, this is merely a demographic fact. It has nothing to do with Social Security. Dependency will rise whether Social Security is preserved, privatized, or even abolished. It will rise under all variations of the privatization scheme. Unless they really do die sooner, the elderly will not go away.

Therefore, income will have to be set aside to meet their needs. From any rational point of view, the only issues are how much must be set aside, and on whom will this burden fall? We can continue to share out the burden. In doing so, we recognize the reality that as the costs of caring for the elderly rise, a collective system is not only affordable, but is actually the only way we can provide decently for all.

Or we can pass the burden over to the most fragile, uncertain, uneven, at-risk institution in America today. That's the family, in case you haven't heard.