When President Daniel Ortega of Nicaragua announced a plan to put the Nicaraguan Social Security in better financial footing by the obvious way—increasing contributions into and reducing payouts from the broken system—deadly protests broke out across the nation. The protests were so serious, they forced Ortega to climb down from the proposed policy.
Now, don’t get me wrong; it couldn’t have happened to a nicer old Communist tyrant. I’m not shedding tears for Comrade Ortega. But the reaction of the Nicaraguan people wasn’t exactly virtuous. Because the Nicaraguan Social Security system is broke, and they refuse to deal with its reality. The American people is behaving the same way.
Social Security, our Social Security, is as broke as Mike Tyson and as promising as Blockbuster stock options. (This is still better than Medicare, which is as broke as O.J. Simpson and as promising as the Zimbabwean dollar’s exchange rate). I know this because the trustees of Social Security and Medicare explain just how broke the programs are in their annual reports.
The Trustees recommend that political actors take steps to reform the programs. To reform Social Security, some combination of increased contributions and lower benefit payouts seem like the likely result. So far politicians refuse to act, and who could blame them, because the America people are unwilling to listen.
The biggest problem with Social Security is that people think it is a retirement program, but in truth it is a large transfer program disguised as a retirement and insurance program. You don’t get what you put into the program, or what you ‘earn’; most people will receive more than they contributed, while the ‘rich’ are fleeced, again. Or looking at it from a different angle, the old fleece the young, and generations yet unborn.
What is to be done about it? Doesn’t matter now, because until a crisis is near there won’t be the political will to do anything about it. What makes Social Security so potent as a wealth transfer program is the sense of entitlement it creates in its present and future recipients—most of us think we earned those benefits. The last politician who tried to do something about the program’s shortfalls was George W. Bush, and he got buried for it. The other politicians learned the lesson. This week’s riots in Nicaragua provide a refresher course.
