Stepping on the third rail of politics.

• Author: Weidenbaum, Murray
• Position: National Affairs - Social security

WHY SHOULD young people be concerned with benefits to old folks, such as Social Security? Basically, because they will be paying for the rising governmental payments that will be coming due in the years ahead. The Federal budget primarily is becoming an instrument for an intergenerational transfer of money--from the working population to the retired, benefiting the old at the expense of the young.

Federal "entitlements," notably Social Security, are becoming a key issue of public policy. Today's politicians have begun to talk about them. That is an improvement over the old view that "Social Security is the third rail" of American politics. So far, though, it is just talk, often uninformed on all sides. A truly serious concern has yet to get the attention it deserves: how long will the working population--say in 2020 or 2030--agree that the largest share of its taxes will go to the people no longer working? For a great many citizens, payroll taxes for Social Security and Medicare exceed income taxes.

Some factual, historical background information is needed. Poverty used to be a characteristic of old age. That was the major justification for setting up Social Security in the first place. Until 1973, the facts supported that policy position. According to the Census Bureau, before 1973, a higher proportion of Americans over age 65 were in poverty than were people younger than 65. Since 1973, the situation has been reversed. A larger and rising share of the population in poverty now is represented by those under 65 years of age.

The net worth of the bottom 10% of households aged 65-69 now is about $200,000. For the median household, it is more than $700,000. For the top 10%, net worth averages over $2,000,000. Any of those numbers is a fortune to most people who are of prime working age--21 to 65.

Poverty at present mainly is a children's experience, especially in female-headed households. However, senior citizens are a far more powerful interest group. They are the personification of one-issue voters. If you are retired, the main way of increasing your income is through pressure on government, and retirees in general have more time to write letters, call congressional offices, and vote. The data is clear: people aged 65-70 are more likely to vote than people 18-21.

The general idea of the Social Security program seems simple enough. The working population pays into a social insurance system. Each worker gets a card for his or her "account." When they retire, they start collecting their benefits, which supposedly they (and their employer) paid for during their working lives.

What is the reality? The present system is not financially sustainable. Congress has voted for more Social Security benefits than the special taxes that will be collected to pay for them. By any reasonable actuarial standard, the Social Security program is not solvent. That is what the Federal government's annual actuarial report says year after year. The current estimate for the Social Security fund running out of money is 2033.

Federal financial matters usually are quite complicated...