No. 41
December 21, 1999
Naomi Lopez*

A recent Cato Institute/Zogby International poll reveals that more than 78 percent of respondents ages 18-29 prefer "that the Social Security system be changed to give those who want the choice of investing their Social Security taxes through individual accounts similar to IRAs or 401(k) programs." But imagine my surprise upon learning that, according to another recent survey, the Social Security Administration offers superior customer service, even when compared to many private sector organizations.

The American Customer Satisfaction Index Survey (produced by the University of Michigan Business School, the American Society for Quality, and the Arthur Anderson Office of Government Services) also found that the agency’s customer service and perceived quality scores were so high that they outpaced many private-sector industry giants, such as Levi Strauss, Nike, and Nissan.

Processing millions of retirement beneficiaries’ monthly checks and responding to inquiries are no small feats. But how could the largest government program, not just in the U.S. but the entire world, achieve such stellar results—by polling only current Social Security retirees.

Never mind the many Americans who will die before reaching retirement, the many married women working outside the home who will receive no additional benefit from their contributions, and the generations who will receive less money than they contributed to the program. You might be able to get it your way at a burger bar, but not under the Social Security program.

Social Security is advertised as "insurance against old-age poverty." The truth is that the Social Security system is nothing more than a pyramid scheme operated by the government, by which today’s workers pay for the benefits of today’s retirees. Furthermore, the government’s own actuaries predict that the program could be insolvent in 2014.

Imagine being required to pay for your car up front and then being assigned a bright orange Trabant by the dealer, with no guarantee that you would even take delivery of the automobile. Consumers would reject this bad deal because they have a choice in cars. Unfortunately, today there is no consumer choice under the Social Security system.

In fact, there is not even a right to one’s Social Security contributions. The U.S. Supreme Court ruled in 1960 that there is no guarantee—much less a money-back guarantee—to any Social Security benefit. All benefits paid are based on political decisions to do so—not a legal one. That means trouble down the line.

Today’s seniors are healthier and more active than previous generations. As a result, many continue to work past the government-imposed retirement age to subsidize their retirement income, financially to support a spouse or relative, or to simply remain active. But because of the "earnings limitation," working seniors can face severe financial penalties on their income. Like diamonds, taxes are forever; unlike diamonds, no one needs more taxes.

The Cato Institute/Zogby International poll also found that, in response to the question "Generally speaking, do you have faith in the government’s ability to straighten out Social Security’s problems?," the majority of the respondents said "No." That is not surprising given the recent political maneuvering on the Social Security issue. Both Republicans and Democrats did little more than throw punches at the each other during the recent budget battle, demonstrating once again that, while like a circus, Washington is not the greatest show on earth.

Even if the Social Security surpluses are left unspent, issues such as establishing private property rights over one’s contributions, abolishing the earnings limitation, and giving workers real consumer choice have been unaddressed. That is Scrooge-like behavior toward those paying the bills, and legislators need to take heed when making their New Year’s resolutions.

Social Security may be popular among retirees receiving monthly checks from Uncle Sam, but it is not the program of choice for a new generation.