John T. Harvey - Why Social Security Cannot Go Bankrupt

John T. Harvey says that social security cannot go bankrupt because it does not rely on a pool of money, but on our productivity instead.

Because of machinery and automation we all produce far more than we need, and so we able to share some of what we produce with others. That means we can set up a system where people can retire from work when they get older because those in work can easily produce the extra that they need. And when these workers get older they too will benefit from this pension system and be able to retire early.

Our level of productivity may change over time, more sometimes and less others, with a trend towards always improving, and so social security cannot run out of money, unless we decide to turn all the machines off.

With productivity so much higher today, you wonder where all the money is going, especially when people are working harder than ever.

Economists may tell us that if we pay ourselves too much, or do less work, then the competition from other countries will wipe us out. Hmm, then who is globalisation working for, and why do we bother with it?

It is a logical impossibility for Social Security to go bankrupt. We can voluntarily choose to suspend or eliminate the program, but it could never fail because it “ran out of money.” This belief is the result of a common error: conceptualizing Social Security from the micro (individual) rather than the macro (economy-wide) perspective. It’s not a pension fund into which you put your money when you are young and from which you draw when you are old. It’s an immediate transfer from workers today to retirees today. That’s what it has always been and that’s what it has to be–there is no other possible way for it to work.

Forbes


John T. Harvey - Why Social Security Cannot Go Bankrupt