Free Food! and the Opportunity to Reduce Poverty

In last week’s article, “Funding Your Retirement 101,” it was said that when evaluating reform proposals for Social Security, you should always remember that “there is no free lunch,” well that was wrong, there was a free lunch at the Congressional Town Meeting on SS this past Saturday. The meeting was sponsored by Congressman Bernie Sanders, AARP, and a number of other Vermont-based organizations which represent people who benefit from Social Security.

The overarching message of the meeting was that we need to strengthen our SS system, and not create a universal retirement plan based on private accounts which exposes retirees to investment risk. None of the speakers wished to argue that Americans should not be allowed to invest in the stock market privately; on the contrary, during the question and answer period one senior even suggested that the amount of untaxed income which can be diverted into IRA’s and 401K’s should be raised as a way of encouraging workers to augment their SS income during retirement.

Several speakers made the point that for those who can afford the risk associated with investing money privately, the possibility of higher returns is quite appealing, however for those Americans whose income is not sufficient to assure that they will not be in poverty when they retire, the knowledge and assurance that the government will provide at least a minimum level of material comfort for them via SS, is incredibly valuable and should not be underestimated.

Sanders stressed the success of the existing program, which is credited as the main reason that poverty among the elderly has been reduced from 60% at inception of SS to 10% today. He expounded further that the system is our most successful anti-poverty program, and although there have been some real scares in the past, SS has never failed to meet its obligations to senior citizens, a surviving spouse or the disabled.

Congress has always managed to pass reforms such as a raise in payroll taxes, which have strengthen previous forms of our current system, giving them increased longevity while protecting benefits for all recipients. This is not a have your cake and eat it too proposition, it requires some people paying more, hopefully rich people who can afford to pay more, in order to insure that the system continues to be an intergenerational success at poverty alleviation.

For Sanders, reform of SS, is less of a logistical challenge and more a question of ethics. As he put it we can choose between “progressive taxation” and “Social Darwinism” There is no reason to say that the “unfunded liability” the system faces now, can not be addressed in the next 37 years, before benefits would have to be reduced. Beyond holding the opinion that it is bad public policy to abort SS, Sanders stated it is bad politics because the program truly has broad public support as it is. This is where I think Sanders is wrong.

It is only bad politics to defy public interest when the public votes and is politically involved; otherwise there are no political repercussions for acting against voter interests, and a lot of incentives to act in the interest of the vocal few, be they Wall street, or campaign contributors.