Older people often say that any changes to Social Security benefits should exempt them from cuts “because they have already paid for their benefits.” You’ll hear versions of this argument from politicians and pundits but especially from people who are concerned about their own Social Security income. It also just so happens that it’s obviously wrong, for reasons which I’d never noticed until last month.
The idea is that you can’t cut the benefits of someone who is 60 because they have already paid, but since I’m 27 and have only been paying Social Security for less than a decade, you can cut mine.
This doesn’t make a bit of sense, because if you cut my future Social Security benefits, I still go on paying taxes at the same rate for the rest of my working life. Actually, I’ll pay higher taxes because the Social Security tax rates increased sharply throughout the 70s and 80s. So I will pay for 40 some years of my working life, just like a member of my parents’ generation.1 If all those years of taxes guaranteed them benefits that can’t be cut, why don’t I get the same thing on the basis of the taxes that we all know I’m going to be paying? There’s no conceivable difference.
That said, there is a different reason that if Social Security is cut, it should fall more heavily on people my age (that’s a big if because there are decent arguments that Social Security is the wrong place to make cuts). If I had to, I could start doubling my cat food purchases and put away enough money to fund all of my retirement without a cent from Social Security. In contrast, someone who is 60 or 65 has extremely limited flexibility. If you are a year away from retirement you can’t make major changes to how much you have saved regardless of what you do for that year. People about to retire have made plans incorporating current Social Security payments, and you can’t fault them for doing that. So you really can’t make large, disruptive cuts to their payments. That’s not an absolute ban–responsible retirement planning involves preparing for uncertainty–but it sets pretty substantial limits on what we can do the older generation’s pensions. It also happens to be entirely separate from the argument set out at the beginning.
1 Who were, admittedly, walking uphill both ways in the snow at the ages when I sat here blogging. I should’ve ditched the first person and talked about a hypothetical member of my generation who’s had a less cushy life and who has consequently spent more of his teens and twenties paying payroll taxes. Oh well.