Who you compare yourself with says a lot about who you want to be. A common talking point from the Left regarding the generosity of Social Security benefits isn’t entirely honest, but more important, it’s indicative of the broader views of American liberals.
It’s a mantra from the Left that Social Security benefits are low compared with the pensions provided in other countries, and therefore we should fix Social Security by raising taxes instead of reducing benefits. For instance, the Century Foundation argues that Social Security’s benefit levels are far from overly generous and, internationally, rank near the bottom in the share of a retired worker’s past earnings that they replace.
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The Century Foundation accurately points out that most OECD countries offer significantly higher pension-replacement rates — that is, pension benefits relative to pre-retirement earnings — than does the U.S. Essentially the same point has been made by, among others, the Center on Budget and Policy Priorities, the National Academy of Social Insurance, and the AFL-CIO.
Now, one reason to be skeptical of this argument is that Medicare benefits are generous relative to other countries’ old-age health-care benefits, and yet the Left wants to fix Medicare the same way it wants to fix the allegedly stingy Social Security program: by raising taxes rather than reducing benefits.
But there’s another reason this argument doesn’t do much for me: I honestly don’t care very much what Greece, Iceland, and Luxembourg (the medal round of the OECD pension-generosity Olympics) do. Leaving aside that two of these countries are insolvent and the third is a Lilliputian tax haven, these countries and most of the rest in the OECD simply think very differently about the role of government than we do. When the French decry “Anglo-Saxon attitudes,” that’s us they’re talking about.
But not just us. There is a group of nations that, while each is unique, share those Anglo-Saxon values: the United Kingdom, of course, and its former possessions of Australia, New Zealand, Canada, Ireland, and the United States. Despite our differences, most Americans will find far more in common with the Anglo nations than with Luxembourg.
Wouldn’t it be interesting to know how Social Security compares with pensions in Anglo countries? Pension-replacement rates for an average wage earner in the Anglo countries range from a low of 31.9 percent to a high of 47.3 percent. The U.K. has the least generous pension for the average earner, followed by New Zealand and Ireland. The U.S., paying 39.4 percent to an average earner, is in the middle of the pack. Interestingly, Australia both pays the most generous benefits and is the only country in the group to have what the American Left would call a “privatized” program. Imagine that!
The U.S. is also in the middle of the pack when it comes to financing its pensions. Australia, New Zealand, and Ireland finance their programs through general tax revenues, which are more progressive than Social Security’s payroll tax. But Canada and the United Kingdom, which do use payroll taxes, apply taxes up to a lower wage ceiling. Social Security’s payroll tax applies to the first $106,800 of earnings, equal to around 2.9 times (or 290 percent of) the average wage. In Canada, payroll taxes are levied up to 96 percent of the average wage, and in the United Kingdom up to only 115 percent, according to the OECD.
We’re not an outlier with regards to the overall size of government. U.S. total federal-, state-, and local-government spending was 36.8 percent of GDP in pre-financial-crisis 2007. That ranks us above Australia and below Canada.
Imagine that! There I was, comparing my pension benefits to that of people (the person?) in Luxembourg, when I find out how inappropriate that is!
Seriously, folks, is it too much to ask that Social Security give every person a guaranteed retirement at the lower end of the middle class, and that we depend on private pensions for anything more? And if this requires me paying payroll taxes on more than just $106,800, or even reducing some of my benefits if I have a megapension, is that so awful to be able to have older Americans not choosing between eating cat food and turning on the heat?
Yeah, it is. But then, if you think that it's the responsibility of the government to take from everyone and redistribute it so you can feel good, there's not much reason to debate it.
No doubt, you'll now argue that I want oldsters to eat cat food or have heat, or whatever progressive mantra you wish to espouse. I think that such things are best dealt with privately. Which is easier to do when the government stops taking the same money I might spend myself to accomplish a third of what I could with the same cash. Bureaucracy is inefficient to accomplish goals, unless the goal is inefficiency.
MikeB's little post (and by little I mean in analytical stature) precisely illustrates the problem stated by Andrew Stiles.
Keep in mind that the point of the piece is that places like Luxemberg are irrelevant when talking about our current system.
What is a "guaranteed" retirement? And where would you start the "lower end" of the middle class? Let's face facts, MikeB, the last couple of years of this economy illustrates dramatically how nothing in life is guaranteed. Someone has to be able to pay for all of this. I know of few people who have "megapensions," at least when compared to the cost of living if not to actual dollar amounts, and if they are "megapensions" they were certainly not earned through Social Security as it is today. Which sounds to me like it might actually be better to "privatize" Social Security like in Australia.
There is plenty of evidence that increasing the payroll tax isn't going to solve the problem. As long as more people receive benefits from the system compared to the number of people paying in, nothing of the remedies proposed by liberals will work without cratering the economy in the process. It is going to take something more fundamental than that to fix the system.
Guys like you have been trumpeting for years how "universal" Social Security and Medicare should be. Now the chickens have come home to roost, and here you are posing the phony specter of old people eating cat food - again - in order to scare people from making hard and serious choices. That has never been the choice in these debates, and as long as this intellectually stunted rhetoric continues nothing will be done (but, perhaps, that is what you really want!).
In related news: Worst unemployment numbers in 8 months released today while Obama's team keeps "the photo" in the headlines.
@MikeB: What about men and women like me. I'm 40. I know that I will never see a dime of all that money I've paid (and continue to pay) in to Social Security. Al Gore's leaky little lock box drizzled it away ages ago. Why do I have to continue to ---- my money into the wind for this failed ponzi scheme?
MikeB: I'm 45 and expect to have a megapension, in that I've maxed out my retirement plan contributions all my life and plan to do so until I retire. I expect to make as much in retirement as I did working. What right does the government have in relieving me of some of that money to finance someone who took the vacations that I skipped, or drove the Mercedes when I drove a Ford?
Everyone knows they will need to retire at some point. Responsible adults plan for it.
Am I one of the few who read The Ant and the Grasshopper as a child?
Why does the government have to get in the insurance and investment businesses? That's all social security is: a kind of retirement fund.
The yield is terrible. The payout meager. We live longer now. Surely we can work longer. Let us have our money back and invest it as we see fit. If someone wants to be irresponsible with their money, so be it.
It's really time for conservatives to quit assuming that everything that government does is off limits.
The fact is, we got by just find for 150 years without social security.
There have been four waves of government expansion. The first was during the great depression. The second was during the 60's under LBJs "Great Society programs. Nixon continued to expand government with price controls and new departments like the EPA.
After Reagan, there was a slow expansion of government and then another rapid upturn under Obama. If he had his way, everything would be nationalized eventually, and the sooner the better.
Federal Spending is now consuming 25 percent of GDP. It was just 15 percent of GDP in 1950. It was less than 5 percent before the Great Depression.
Really, we don't need all this bureaucratic waste. Let them and the bums they support go out and find real jobs and work for a living, like the rest of us.
