Family Change – Part 1

I did some research years ago on the Social Security program.  It’s the largest government expense, at about a Trillion dollars a year.  As our general population ages (people living longer and having less kids), this program will only continue to increase in size and scale.

I figured that since the program is so large, there must have been some kind of debate about setting it up in the first place.  I dug around and found that the entire debate in congress is actually posted on Social Security’s own website.  It is pages and pages from the Congressional Record of 1935.  This is pretty dry, but I actually took the time to download it and read most of it.  It was extremely illuminating.

I remember that one of the main overall objections was that it would “end the family as we know it”.  I thought that was a pretty extreme and outlandish claim.  Families certainly continue to exist, and I didn’t think at the time that Social Security had much of an impact on families over the years since it was set up.  But then I read the argument again.  The key phrase is “as we know it”.  What he was talking about was the family as it was known in 1935.  For most, this was the extended family.  This was not just the mom and dad with their kids.  Back then the family also included the grandparents, and it was the working adults who took care of those too old to work anymore.

Social Security did end the family “as we know it” from 1935.  This is because, as Rep. O’Connor (D-NY) put it, “we would have the spectacle of sons and daughters giving up supporting their parents and wanting the Federal Government to support them” [Congressional Record – House, 1935, p5461].  This was pooh- poohed by others in the debate who assured everyone that wouldn’t happen.  Well, it did.  The extended family is a thing of the past.  And few of us today are in any way prepared for taking on this responsibility, as it HAS been handed over to the Federal Government.

The basic problem with Social Security is that it is not a savings or an insurance program.  The money that you or your parents put into the program is used to pay off other people.  Like any Ponzi scheme, the first people to get money from Social Security really made out well.  Literally the first person to receive a check was Ida May Fuller.  She had contributed a total of $24.75 into the program.  By the time she died, she had received a total of $22,889.  It wasn’t because she was a rock-star at investing and turned every dollar into a thousand.  She got this much because she was getting the money put into the program by other people.

We now regularly assume that the government will take care of our parents and will take care of us.  It is both scary and astonishing to read how few elderly have any retirement savings, and how many are still paying mortgages while attempting to live solely off of Social Security.  What do you think will happen when this program no longer provides enough to buy food, let alone anything else?

What to Do

The rational thing would be to change the Social Security program into an actual investment or annuity type program.  I am not talking about putting it into the stock market, but into things like treasury bonds.  But the main point of the changed program would be that you only got out YOUR OWN MONEY plus interest.  This would require a significant upfront cost of paying off the people whose money has already been given to others.  But it is the only conceivable way of saving this program.  As Rep Monaghan of MT put it in 1935, “There will be a day of reckoning for those suggesting the delusional plan suggested”.

By destroying the extended family, none of us are prepared to go back to it.  Children are unprepared to take in their parents and care for them.  On the other side, seniors are unwilling to give up independence and give a lot of household decision making responsibility to their children.  Both sides need to discuss what would happen, and the ground rules for such arrangements.  Because it is not a matter of if, it is a matter of when we have to go back to extended families, or most seniors will literally starve to death.

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