March 23, 2005, 7:46 a.m.
Rebel Risk
We’re going to change the world but can’t invest?

By Jude Blanchette

”If there’s one voice conspicuously absent in the debate over replacing Social Security with private accounts,” writes Ben Hubbard, campus director at the “progressive” Center for American Progress, “it is young people — the ones with the most to lose.” As one of the young people Hubbard speaks of (I’m nearing my 25th birthday), I would like to reflect for a moment on exactly what he thinks we have to gain and lose from keeping the current system as is.

The first thing we gain is a legal dependent — our grandparents. Of course, it’s not called dependency; rather, Social Security represents a “social contract between the ages.” Like most social contracts, however, it’s neither social (government coercion rarely is), nor is it a contract (I don’t remember signing it). Instead, Social Security is little more than glorified income redistribution. The young pay the old and hope that someday there are enough youngsters to do the same for them. Ethical, it's not. What is just about one human being coerced to subsidize another, I don’t know, but certainly there is something even more unsettling about the younger (and therefore relatively poorer) subsidizing the older (richer) to take Carnival cruises. (According to Washington Post columnist Robert Samuelson, 20 percent of senior citizens do.)

On this point, the hypocrisy coming from Washington is palpable. In the same breath that a Democratic senator will decry the “mortgaging of our children’s future” with tax cuts to the “ultra-rich,” he will accuse you of war crimes (as Samuelson put it) if you broach the idea of a) cutting benefits, b) raising the retirement age, or c) allowing for personal retirement accounts. Furthermore, Democrats seem willing to stuff this problem under the bed and wait for a meltdown before they propose any type of reform. For a political party that does everything in the name of the children, this is odd behavior.

Young Americans also gain a large tax bill. Currently, those of us earning under $90,000 pay 12.4 percent of our wages to the government in the form of Social Security taxes. For an individual making $30,000, this amounts to $3,720 — a sizable chunk of change. What is truly perverse about this system is that it is precisely at my age that I attempt to plan, dream, and create a life for myself. Maybe I want to travel Europe, write a book, or start a small business. Perhaps I want to take my dream job in Manhattan or go on to graduate school. All of these require money. Yet by taking over 12 percent of my income in Social Security taxes alone, the government limits my ability to pursue these and countless other ambitions. Many argue that exactly because we are off doing, the young don’t adequately plan for retirement. While it is true that our time preference is higher, a government-enforced savings plan defies all logic if it denies you the opportunity to create a life that allows you to retire independently.

What, then, do we gain under the current system? This is slightly more confusing, and all the more tragic.

The president was recently quoted as saying, “If you're a younger worker, I believe you should be able to set aside part of that money in your own retirement account, so you can build a nest egg for your own future.” This is a nice sentiment and I’m glad to hear a shift away from the social-contract malarkey. Let me, however, go one step further: Anything less than this is the very negation of what it means to be young.

The reader may argue that this is a stretch; certainly, participation in Social Security doesn’t spell the end to youth. With almost any other government program, I would tend to agree. Yet, two things must be kept in mind: 1) Social Security is routinely described as the 20th century’s most important program, and 2) it is by far the largest program in the United States. This is not Bill Clinton’s midnight basketball we’re talking about. Social Security has turned us from rugged and intrepid adventurers to a weak and feeble voting bloc, cowering at the feet of the New York Stock Exchange. We want to change the world, but lo, give us a few thousand dollars of our own money to invest and we become financial invalids.

Consider the following article by Traci E. Carpenter, senior at Michigan State University who interviewed several students on campus for a piece that appeared on Newsweek’s website: “However, [Megan Connor, 21,] is concerned that our generation isn’t prepared for what Bush has proposed. For those of us not financially savvy, and clueless when it comes to investing, ‘it’s going to be guesswork,’ she says.

“Andrew Bell, 21, share the same anxiety. ‘People have a pretty short-term outlook,’ he said, adding he would be willing to pay more now to keep the current system because it would be ‘one less thing I have to worry about.’”

If this outlook is common amongst my age demographic (and based upon my experience, it is), then today’s youth have broken radically with the historic conception of self-reliance. To have twentysomethings complaining that planning for their own retirement might be too confusing is a sad departure from the rugged idealism we once celebrated. Be it James Dean, Holden Caulfield, Tom Sawyer, or Frodo Baggins, the artistic and literary conception of “youth” meant to struggle with self and uncertainty in order to find identity. We were once Joseph Campbell’s “hero with a thousand faces,” setting out to explore the world.

Yet in today’s world “risk” is something avoided at all costs. As one recent New York Times story informed us, “Private Accounts Are Risky, Many Young Workers Say.” Well, of course they’re risky! What in life that has ever brought reward had no risks? Rep. Tim Ryan of Ohio patronizes us one better: “The stock market is risky business. Investing in the stock market can pay a higher return, but it’s not a sure thing. That’s why people are willing to forgo the potential to score big in the stock market in return for knowing that their hard-earned savings are safe.” [Emphasis added.] Even if Rep. Ryan’s characterization of the president’s plan were true (which it’s not), what upsets me even more is the willingness of young people to accept it.

Even if we assume for the moment that there is no financial crisis in Social Security and that its future is rosy, I maintain that a moral crisis looms even larger. In the name of financial “security,” we’re increasingly willing to trade in our principles of self-governance, self-reliance, and economic freedom. What could be more “risky” than this?

— Jude Blanchette is Henry Hazlitt Research Fellow at the Foundation for Economic Education.