For Baby Boomers, Just How Secure Is Social Security?
Francis, David R., The Christian Science Monitor
WHEN Dorcas Hardy refers to the Social Security system in the United States she calls it "social insecurity."
The former commissioner of Social Security has been traipsing around the country promoting her book, titled "Social Insecurity: The Crisis in America's Social Security System and How to Plan Now for Your Own Financial Survival" (Villard Books, New York). The theme of the book is that the system will be "in serious trouble soon after the start of the 21st century."
That's not what some other former Social Security commissioners say. They maintain people can count on getting their pensions.
Asked in an interview whether she was alarmist, a technique some writers use to sell financial books, Ms. Hardy replied: "No, I don't think so. Nor do I believe that I am saying anything different than when I was commissioner."
She wrote the book with her father, C. Colburn Hardy, who has written 27 books in the financial area.
Pressed a bit, Hardy admits that the system won't go bankrupt. "That's not true," she says. "The government will not break that contract entirely."
Nonetheless, she argues that between 2010 and 2020 when the baby-boom generation retires, the tax burden on the working generation will be such that benefits will have to be cut in some way. The age of retirement with full benefits will be advanced. Or the amount of payments will be reduced from the present level. Or Social Security taxes will be raised. Or taxes on Social Security benefits will be increased.
So, she advises baby boomers, "Go home and save and save and save."
That may be good advice, but not necessarily because the Social Security system is in grave danger. It is probably the most popular social measure in the country, and not just among pensioners. Any politician who seriously damages that system is not likely to survive at the polls.
Analysis of the soundness of the Social Security system depends not only on actuaries assessing the demographics; it hangs on economic assumptions. Will economic growth and productivity step up their pace in the next 20 years? If so, the working population will be better able to afford the taxes that pay for the pensions of the retired. …