Questioning a Talking Point

It is vital to emphasize one particular aspect of this: the total lack of vesting of Social Security benefits in the event of death before retirement.

A person who works and pays FICA taxes over an entire working career and then dies the day before his 62nd/65th birthday leaves his estate exactly zero in benefits. Biggs calls that a "silly standard," yet it happens all the time.

Without Social Security taxes and benefits, what would the poverty rate among seniors be?

When you consider the negative effects that SS has had on economic growth and the low rate of return, poverty rates among seniors would probably be significantly lower without SS.

Kip -- your statement about leaving the families nothing is just plain completely incorrect.

Under SS surviving spouses receive benefits as long as they live and children get benefits as long as they are underage.

The entire argument assumes that the money going into SS would have been saved and invested. That is an extremely unlikely assumption. Just look at how few people invest in the tax exempt and company saving plans they are offered.

SS is a form of mandatory insurance or savings.
Provide us with a single bit of evidence that without the mandatory nature of SS that the great bulk of people, especially those in the lower income groups, would save and investment a comparable sum.

They did not do it before SS came into existence, so why should they do it now?

I cannot imagine seniors in this country can be affluent without mandatory savings/insurances. SS is the best idea ever in this culture.

Whether or not you think people would save money if left in charge of their own finances doesn't have anything to do with whether or not social security should be MANDATORY for all. Even other countries that have mandatory systems, like Chile, at least give people more options.

If you really want to have something like SS, simply make it like a "default" where people can opt out if they wish. If you think most people are too stupid to save for their own retirement, that doesn't mean they will be too stupid to opt out of a system they are enrolled in by default.

I used to do employee benefits enrollments at companies (during the summer in college), and this happens all the time. The people that don't care about their benefits can just get thrown in the government's retirement plan, while the people who don't want a real negative rate of return (grin) can opt out and invest themselves.

What's wrong with that?

I've made an updated post on the Social Security vs poverty issue here. Thanks for the generous comments! http://andrewgbiggs.blogspot.com/2008/08/more-on-social-security-and-poverty.html

Well if we are to submit opinions based on simple assertion of what we would like to be then yours is as good as any. Some of us have a little higher standards.

To answer the question, you need to know not just what GDP growth would have been without SS (this effect is probably small) but also the amount that people would have saved if they did not have SS. As Dazhi alluded to, some people might not save nearly enough.

I suspect, however, that many would save enough to make up for SS, and many would find that in the absense of SS, their families and communities would pick up the slack, and keep the living standards of the elderly pretty high. That said, perhaps only for those unlucky ones without that kind of support network, SS is still an important program.