Truth - Al Franken [88]
Wait a minute. The Trust Fund is T-bills! Treasury bonds. Remember? The worthless IOUs? They’re treasury bonds! Bush saw them himself in Parkersburg, West Virginia.
How could an individual do better by investing in treasury bonds than Social Security does by investing in treasury bonds? The answer is a pretty fundamental one. It’s called the legacy debt.
Here’s how Social Security works. Workers pay payroll taxes. Some of that money turns into benefit checks for retirees (and survivors and people on disability) and what’s left over goes into the Trust Fund, which is invested in T-bills.
You might say, “That’s so unfair! Why am I paying for my parents’ retirement?” Ah! But your parents paid for their parents’ retirement. And your children will pay for your retirement.
“I see,” you say. “It’s kind of a grand intergenerational covenant. A ‘social contract,’ if you will. Wise.”
But then your stupid, right-wing brother-in-law pipes up. “Why is that? Wouldn’t it just be easier for every generation to take care of its own damn retirement?”
You’re flummoxed and turn to me. But I’m ready for your idiot brother-in-law.
“Well, that would be nice, sort of. But it’s too late now. Your parents already paid for their parents’ retirement. If you don’t pay for your parents, they’ll starve. Or more likely, move in with you.”
“I wouldn’t want that,” your moron Dittohead brother-in-law admits.
It’s time to press my advantage. “The legacy debt is the money that each generation owes to the generation before. For example, my parents’ generation went through the Depression and won World War II. For that reason, Tom Brokaw dubbed them the Greatest Generation.”
“I’ve heard of them,” says the moron.
The tension is slowly draining from the room. I sense that your brother-in-law and I are bonding. Coffee is offered, and accepted. I spend the next hour sitting at your kitchen table, explaining to your brother-in-law, who turns out to not be such a bad guy after all, that it makes no sense to compare the “rate of return” of Social Security to returns on any kind of investment. Because with Social Security you have to cover the legacy debt. If tomorrow you switched to an entirely private system, sure, you’d own some stocks, but your retired parents or grandparents would still be checking their mailboxes for those precious checks that keep them out of your spare bedroom. The Greatest Generation beat the Nazis. If we broke the social contract and stopped paying into Social Security, imagine what they’d do to us. Let’s face it. We’re kind of soft.
During the spring of 2005, conversations like this one took place across the country. It didn’t dawn on the Bush administration that such conversations were hurting them instead of helping. On March 24, three weeks into the sixty-city tour, Treasury Secretary John Snow (whom the White House had desperately tried to get rid of, but kept when they realized they couldn’t find anyone with any credibility who would be willing to toe their line)6 pointed to these conversations as evidence of tremendous progress:
REPORTER: You say there’s a climate of ideas. Are they reaping some results beyond the personal retirement accounts?
SNOW: Oh, I think absolutely, without any doubt, this is reaping rich rewards. All over America today, at lunch counters and dinner tables, breakfast tables, the evening news, the morning news, Social Security’s being discussed.
In truth, Snow was underselling the case. Social Security was also being discussed in breakfast nooks. At brunch. By vending machines. At water coolers. With street vendors. At lap dance tables, sushi bars, and in dentist chairs. (Not by the patients, obviously. More by cute dental hygienists.)
But in all these conversations, Americans were gaining newfound appreciation for FDR’s vision of retirement security for all. In a society where every person faces greater and greater economic risk, Social Security represents our best ideals—the deeply held conviction that we’re all in this together.