The Old Folks Are Doing OK

"Round up everybody that can ride a horse or pull a trigger," John Wayne says in "Chisum." "Let's break out some Winchesters."

That's how I feel every time someone calls for "saving" Social Security. Conservatives have been likening it to the Bernie Madoff scandal. Some call it a Ponzi scheme, as MSNBC's Joe Scarborough did recently. And even Democrats talk of fixing the program.

Social Security is about the only thing around here that doesn't need fixin'. The Congressional Budget Office says it can pay all scheduled benefits into 2049. Sure, you want every entitlement to be funded into the next millennium, but 40 years of solvency sounds pretty darn good these days.

Social Security -- along with Medicare -- have made America's elderly the most economically protected age group in America. How many Americans got a 6 percent raise this year, assuming they still had a job?

"The typical retired person has relatively more stability than the employed population," says Sherman Hanna, who teaches financial counseling at Ohio State University.

Hanna recalled a conversation with his retired mother in Florida. "She was doing quite well," he told me, "certainly compared to my sister in real estate married to an RV salesman in Upstate New York."

I recently visited an elderly aunt, a widow of modest means living in Boynton Beach, Fla. While driving her to the Publix for food shopping, I asked how she's getting along, given the bad economy. Just fine, was her upbeat answer. She had some savings in bank CDs and her Social Security checks. Medicare picks up the big health-care bills. The condo is paid for, and her electric bills have inched down thanks to lower energy prices.

Many older Americans have suffered real-estate and stock-market shocks, as have the rest of us. Taking a job to make up the losses is not an option for most of them. And some are burdened with debt because they foolishly treated their homes like ATM machines.

Those who followed the conventional advice and prepared for retirement by paying down the mortgage and putting most of their savings into conservative fixed-income investments are doing OK. So what if their home isn't worth what it was. They're not selling.

Over in Lake Worth, the retired middle-class masses had again gathered for lunch at John G's, an institution on the town's public beach. While the gray heads chowed down on the fish and chips, a line of them waited outside for tables. Not much recessionary gloom here.

A Ponzi scheme is a fraud in which early investors are paid off with funds raised from later ones. Why isn't Social Security a Ponzi scheme?

First off, Social Security is a form of insurance, not an investment vehicle. It pays benefits to retirees but also to the disabled and to the survivors of workers who die. People who live into their 70s may collect for a long time. Those who die young don't.

Social Security is mostly a pay-as-you go program. For the last 25 years, though, workers have been putting more into it than was needed to support current beneficiaries. This was to provide a cushion for a surge of later retirees, the baby boom generation -- and a very un-Ponzi-like thing to do. The Social Security Trust Fund keeps that extra money in U.S. Treasury securities, which pay interest.

Medicare does need reform, but Social Security is humming along. It is clean, simple and successful, which drives enemies of government programs crazy. Telling lies about Social Security is a First Amendment right. But if hearing them makes us want to saddle up the horses, that's the way it's gonna be.

COPYRIGHT 2009 THE PROVIDENCE JOURNAL CO.

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Views expressed in this column are those of the author, not those of Rasmussen Reports.

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