OK, let's try again. We can talk all day about how Social Security works and the mistakes that have been made. I could bore you to death with all the details that I've accumulated over the past 30 years.
I was simply correcting your assertion that the future value of Social Security benefits exceeds the present value of your contributions (for most people). That's not true, and it hasn't been so for quite a while. The early recipients did quite well, and some of the beneficiaries that retired in the 60's, 70's, and 80's did well because the legislated increases in benefits (both overt and COLA) pushed their benefits beyond an actuarilly-insustainable level -- which is what got us in this mess.
It's not as simple as adding up your contributions (real or hypothetical). You have to account for the time value of money, using historical data and/or an accepted future discount rate. I'm not an actuary, nor do I play one on TV. But, if you really want all the details, you should consult one.
And yet, the amount that will be paid in by people in their 20s and 30s will be much less than the benefits they receive. The older you are, the more you get out of the system. People at or near retirement age look at what they paid in and legitimately say its not fair that they should get their benefits cut since they are simply getting out what they paid in. That is understandable but ignores the point that there is no good outcome here where everyone gets their "investment" back. If today's retirees or those close to retirement get benefits at current levels, the younger generation will be completely screwed.
So the issue is how to we make the system sustainable and share the sacrifice that will be necessary? The money that was paid in is gone. There is no vault with cash in it that can be opened to pay benefits whether its a share of a Treasury bond or some other promise to pay. The cash will come from taxes. So the question still is, is it fair to ask young people to pay for the current level of benefits for old people or should the pain be spread around? My answer is that the burden should fall more heavily on older people because young people did not create this mess.
I’m wondering if those on this thread who are squawking that “we have to do something right now” are underwater on a bunch of puts for June 2011 ten-year treasuries.
Here’s a one year chart on that particular note.