The Coming Crisis for Social Security

by Benjamin Domenech on 7:21 am July 23, 2010

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This poll should have any American who understands what happened in Europe concerned. Gallup reports:

Six in 10 Americans who have not yet retired believe they will get no Social Security benefits when they retire, more pessimistic than at any time since Gallup began asking this question in 1989. Similarly, retired Americans are now significantly more likely than they were five years ago to believe their existing Social Security benefits will eventually be cut.

While it may seem ludicrous to talk about the collapse of Social Security in any real sense (“can’t the government just print more money?”), there’s a political reality here that we saw illustrated overseas, and that this poll indicates could happen — indeed, many retirees expect it to happen. This is the spiraling problem with pay as you go systems: as the amount of resources in our economy decrease thanks to recession and a shrinking workforce, there’s less funds to redistribute. And as people feel concerned about their future and their retirements, they tend to naturally increase their saving rate, which serves to further decrease America’s growth potential.

Unlike prior discussions about Social Security’s future, which primarily pitted the youngsters against a massive generation which was present at the inception of the program, we are now entering an era when the entire working sector of the economy has no expectation of accessing this entitlement. In a growth-capped economy, they will naturally resent working for a retired mass of Baby Boomers, netting money the next generations have no hope of seeing.

Sooner or later, this will have political ramifications. When a supermajority does not expect to receive the benefits they fund for others, they will inevitably reach a breaking point where they have the political will to deny those benefits to others.

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