Topics: Unions, Subsidy
14 Dec 1994
From: "DG Ervan Darnell"
On tonight's MacNeil/Lehrer there was an interview with Bob Kerrey and some
labor sympathizer (whose name I have forgotten). Both just finished work on
a panel that examined what to do about growing entitlement spending. One of
the proposals that was considered was to slowly raise the retirement age
(for social security benefits) to 70. That's certainly a step in right
The labor fellow was opposed because "it wouldn't be fair for young workers"
and it would be cruel blow 'for someone working in a mine as opposed to an
office'. I laughed at both of those as non-objections. The point of course
is that the young worker will never get social security. "fairness" is just
quite irrelevant, reality will not comply.
Anyway, the thing I found interesting was an attempt to actually address the
point, he said that raising the retirement age 5 years would cause 20M [?]
young people to be without jobs and that would be even worse than paying the
extra benefits. If he believes that, we should lower the retirement age to
60, or 30 for that matter, and have plenty of good jobs for everyone. It
was a perfect example of a union-think error: 'Productivity is fixed. It
does not matter how much or how little people work or which jobs people do,
we will be equally wealthy either way. The only question is how to decide
who "should" get the money.' This mentality reveals itself in everything
from absurdist wage demands (my favorite: "we don't want a pay raise, only
quality health care for our families", Nynex union) to feather-bedding and
all around gold bricking.
The unemployment claim is pure nonsense. Even the implicit claim that it
would *force* people to work more years is false. Accepting, for the
moment, funding the current obligation as the baseline, raising the
retirement age avoids a tax increase which leaves more money in individual's
hands. They can save that (which they would have paid in FICA tax for their
increased benefit) and retire *even earlier* than if social security had
been in place (since it imposes a frictional cost, at least!) or they can
decide to work longer and make the money they want, or do jobs the like,
instead of feeling like they are losing something by not retiring at 65.
It's strictly a win-win situation for people that have any self control.
Whether or not something should be done for the rest is a different matter I
My proposal: raise the retirement age 1 year every 5 years, indefinitely.
Let people deduct IRA contributions from *FICA* tax (it's from income tax
now) at 50% of the amount of the contribution up to a max of the total real
FICA tax amount (15% of income), then give such people no social security
(i.e. if you save for your own retirement your liability to social security
drops by half). If you really worried about the truly destitute, implement
a sliding scale negative income tax for people over 70.