Real Social Security

It's time to reimagine the program for the 21st century. Here's how it should work.

by Rich Herschlag

The Coronavirus Aid, Relief, and Economic Security Act reduces to the neat acronym CARES. Well, thank you for caring. But this acronym begs the all-encompassing question: Who cares, for whom, in what tangible way, since when and for how long? Like other writers, bloggers, thinkers and miscreants, I’ve written, blogged, thought and bitched numerous times about the plantation state we’ve methodically constructed over the past few decades and how this powder keg was set to blow. The fact that it blew sooner, more dramatically and more easily than almost anyone predicted underscores the need for an autopsy. There is no chance of accomplishing this in one essay or a hundred essays, but here is my brief attempt to address a small portion of our social and economic collapse with one substantial though in no way complete treatment.

A few weeks into the pandemic I happened to hear a radio talk show discussion of the CARES-driven opportunity to tap one’s 401(k) with relaxed terms. This drove me to the internet and to a few phone calls. Normally, withdrawing money prematurely from these funds is discouraged by sizeable penalties—namely, full income taxation in a year you’re probably already in your highest bracket plus a 10 percent penalty. If it’s a loan you’re looking for, you ne’er-do-well, you’ll have to pay it back promptly and with ample interest—to your distant future self. In a perverse version of It’s a Wonderful Life, you get to play Potter to your own George Bailey.

The underlying notion is that people like me are impulsive captives of our family’s material needs and prone to midlife crises causing us to purchase countless sunrooms, tummy tucks and classic Camaros while one day leaving ourselves aged, feeble and selling pencils at the mouth of a tunnel. True.

But on this one fine day in May of 2020 with good citizens shaming other good citizens by posting photos of one another parasailing without an N95 mask, here was the federal government telling me they suddenly trusted me to tap my 401(k) without the penalty for early withdrawal or with a very loose schedule for paying back a loan. Wow, so you really CARE after all! It just so happens  my engineering consulting business is hanging on by a thread, and our tiny rental apartment business is hanging on by a thread that makes the first thread look like nautical rope.

It just so happens I recently collapsed at the financial finish line of my younger daughter’s college career and I’m on fumes helping the older one start her PhD. It just so happens I’m trying to keep a couple of strapped subcontractors going by renovating one last two-family building by a thread so thin it’s really no more than a concept visible only on the astral plane. It just so happens my wife works for a college that has everything but returning students.

It just so happens three of the four of us in this household had six of the seven symptoms of a COVID-19 that will probably never be diagnosed but that nonetheless reduced our mental bandwidth to that of a 1960s AM receiver kit from RadioShack. It just so happens I was living on OxyContin from emergency pandemic root canal surgery and a week later my beloved cat was hit by a speeding Amazon truck in the neighbor’s driveway. It just so happens July 4 is not only the birthday of our once great nation but also the last projected day we’ll have the funds to go to Walmart in a mouth bandana and purchase deodorant. In other words, we are luckier than most.

By CARING enough to allow me to tap my own funds, you have afforded me and the fam some breathing room, even if that breathing will be done through a layer of non-woven polypropylene. The question, however, is what are you doing for those who have nothing to tap in the first place?

We are not a nation of trust fund babies, though we are indeed a nation run by trust fund babies. The majority of working people—whatever the political color of their state or county—given normal wages would have to labor about 200 hours every 168-hour week for a decade or two to stay anywhere near the upper middle class. With no mathematical or biological possibility of this occurring, a sense of powerlessness often creeps into their bones, and unless they are into living out a bonus season of Breaking Bad or Weeds, they ultimately languish under the TMZ-cable-news-America’s-Got-Talent-board-of-trustees radar of our ideal society, rearing their overlooked heads only sporadically at Trump rallies.

The end of this protracted economic general anesthesia will require a few cataclysmic shifts, one of which is allowing the average working person to tap his or her Social Security endowment in much the same way privileged people like myself are allowed to tap their 401(k)s—not simply during a pandemic but anytime past the age of, say, 40. To be clear, this is not your Republican father’s Social Security privatization plan. I have absolutely no interest in diverting trillions of dollars in tightly held Treasury notes to mediocre golf players in Westport, Connecticut looking to make one more morally hazardous killing on the way to the cemetery. What I’m looking to do is liberate tens of millions of hard working relatively destitute Americans by giving them the same sort of access to their own trust fund as a schmuck like me.

One can justify this policy simply by recognizing and responding to the inevitable vacuous, loud, obnoxious objections from the entitled.

The policy will encourage irresponsible decisions by participants. Sure. That’s what people with third homes think of people trying to buy first homes. That’s what people holding 100,000 shares of Proctor & Gamble preferred stock think of people trying to buy a pizza delivery franchise. That’s what folks taking collagen shots think of people getting a knee replaced. Essentially, we have it backwards. The closer to the ground one is—the closer to basic survival issues—the more likely it is that person will make sound, conservative, intelligent enterprising decisions.

The policy will deplete the ability of working people to support themselves in their old age. Maybe, but exactly who has a track record of caring if these people actually reach old age? Fewer and fewer actually do. The numbers don’t lie. A lifetime of clipping coupons, working two shifts, fashioning a timing belt out of bungee cords and taking a third shift to pay for a dental crown isn’t exactly conducive to reaching age 70 with your tennis backhand intact. As in the 401(k), under Social Security liberation there would be built-in limits to what one could withdraw or borrow from one’s account, likely not exceeding 50 percent. As for longevity, there is no better boon to it than giving someone a reason to live.

Social Security is going broke as it is. Fake news. At current taxation rates, the main component, OASDI, will continue to draw down on its endowment until about 2033, at which time relatively gradual adjustments will need to be made in taxation and benefits. It is also entirely possible that under this proposal, those drawing early or borrowing from Social Security will actually increase the fund’s solvency. Increasing GDP and productivity through enterprise tends to do that. And we should not forget for a moment that currently only the first $137,700 of one’s annual income is taxed by Social Security. The future enterprising little guys and gals boosting their annual income from, say, $20,000 to $40,000 will therefore pay more into the fund. Maybe, just maybe the folks making millions every year from Google and Amazon dividends should pay more as well.

Social Security as an established program should not be tinkered with. Social Security has been tweaked more than Kim Kardashian’s stretch marks. The first ever monthly Social Security check—issued in 1940 to Ida Mae Fuller for the grand sum of $22.54—was hardly a forerunner to the checks that today assist the Woodstock generation buying vacation homes in Boca Raton. An amendment in 1961 reduced the minimum retirement age from 65 to 62 with reduced benefits. Social Security has cut the poverty rate of seniors from 40 percent to less than 10 percent not because it’s remained stagnant but because it’s been reimagined, reinvented, and reconfigured so many times. It’s time again.

The policy will severely deplete the labor market. Yes, the slave labor market. Corporate America fears nothing more. A change to Social Security as radical as this may even lead market forces to drive up the equilibrium minimum wage without endless contentious legislation and the bloviating that inevitably goes with it.

The hostile, divisive, self-interested forces that rule over us have, for so many years, foisted upon us the false paradigm of a binary world view—you’re either for a Darwinian capitalist system that rewards your great-grandfather’s lucky birth, or for a socialist nanny state paying unlimited benefits to those wiling away the hours vegetating in their own poop. In reality, the overwhelming majority of people in this country favor inclusive capitalism. Expanding Social Security into a flexible retirement account for those still in their prime earning years is one tool for getting there. And there are many more.

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