Summary and Implications

Despite recent controversies, against the criteria applied here social security is a strong program that enjoys an exceptionally encouraging set of attributes from the perspective of the American political culture. Some of social security's strengths, however, cannot be transferred to programs directed at other social hazards. As a public pension program for the elderly, social security intrinsically enjoys greater popular support than any other category of public social provision.^[41] The program's inclusiveness is clearly one

attraction: though not everyone lives to be elderly, most people probably expect and hope to do so, whereas far fewer people expect or minimally hope to experience serious illness, unemployment, disability, or divorce. Additionally, by and large it is not difficult to make the case that elderly recipients have made some contribution to society. Further, the social hazard of retirement is clearly defined by age, although specific eligibility rules (age 62, 65, or 67) may be controversial. Also, the program has a relatively stable beneficiary population, a characteristic that facilitates efficient administration. Recipients die, but rarely do they move off and then back on the rolls.

In contrast, those strengths of social security that arise either from the inherent characteristics of social insurance or from certain politically acceptable design features could be extended to other social hazards. Among these strengths are the focus on distributive justice, the prerequisite of sustained effort, the indexing of benefits to prior wages, and the supplementary character of benefits. The theme of personal accounts, which gives workers a sense of having a personal stake in the program, is preferable to the unemployment insurance system's reliance on employer accounts. Additionally, social security, apart from the taxation it entails, poses few constrains on negative liberty or property. And since social security taxes are regressive, the wealthy cannot on the whole claim that they are paying for benefits accorded to others, even though the benefit formula is progressive. The economic features of the program include some work incentives and some support for aggregate demand and employment. While the cost of the program is high, this cost is in a sense borne by the beneficiaries, although potential intergenerational inequities exist. Finally, because the program targets a fairly representative cross-section of the population, recipients are not stigmatized.

This degree of fit between social security practice and the values of distributive justice, negative liberty, and economic efficiency is insufficient for strict libertarians and free-marketeers. But as social programs go, social security involves less conflict with these values than do some others.

The practical virtues of social security may also provide useful models for other programs. SSA executives have accrued an enviable record of administrative efficiency, and their strong com-

mitment to their vision of what the program should become has contributed importantly to improving American attitudes toward public social provision.

Additionally, social security relies heavily on a structure of incentives that allows for the positive reinforcement of interests people have for acting in productive, responsible ways. It does so by rewarding work and thrift.^[42] It enables people to meet some of life's most disturbing hazards in a dignified socially approved way.

Juxtaposed to these strengths are some weaknesses. Social security creates a pattern of distribution that deviates from what the market would produce. The intergenerational transfers occurring now are hardly modest, and whenever a larger generation is followed by a smaller one, the systematic granting of benefits that vastly exceed contributions are apt to produce serious funding difficulties and intergenerational resentment.^[43] Imbalances between benefits and contributions also become more troubling as a growing proportion of benefits flow to households for whom retirement does not produce much economic vulnerability or constitute a social hazard.

Another potentially disruptive facet of social security derives from its constraints on individualism and negative liberty. Thus far, however, the program's compulsory character has not been keenly contested. This is a surprise, given the position of negative liberty in American political culture. One explanation may be that social security has represented a good deal financially. And perhaps various features of the program's design offset the provocation that compulsory participation poses for individualism and negative liberty.

With respect to economic efficiency, social security clearly reduces the work incentives of people over sixty-five. In 1935 this disincentive was deemed desirable; today many argue the opposite. As a program financed through payroll deductions, social security contributes to production costs. So in both cost-push and demand-pull senses, the program contributes to inflation. As we have seen, however, we cannot attribute America's lack of competitiveness to social security.

In theory social security may be faulted for violating American preferences for limited and local government, but in practice this clash has not affected the program's popularity. Again, this coun-

terintuitive result most likely reflects the program's design: complex operations are centralized in low-profile, efficiently administered bureaucracies.

Despite social security's track record as a good deal, until recently the retirement benefits have been of questionable adequacy. The introduction of Medicare in 1965 and the cost-indexing of benefits have provided some remedies. But social security's targeting of both social hazards and population remains limited, and the program thus presents some horizontal or support equity problems.

Finally, it is reasonable to expect that current obligations to future beneficiaries in conjunction with the declining ratio of workers to beneficiaries portends increased conflict over social security. When the interests of elected officials, SSA administrators, workers, and beneficiaries differ, the burden is all too likely to be borne by the most vulnerable.

That the preceding list of weaknesses and potential problems has not seriously undermined social security's political popularity and programmatic success suggests that some of social security's strengths eclipse its weaknesses—such as its compulsory character, its size, and its central administration. Part of social security's aura derives from its focus on retirement and is not transferable to other social programs. But social security's three quintessential design features can be applied to other forms of social provision: (1) eligibility rests on doing what society deems appropriate for able-bodied adults—working regularly and building a private contribution to financial security; (2) efforts exerted in the labor force create a clear index by which rights to social insurance benefits are earned; and (3) the program's specific features and language evoke symbols richly laden with traditional American values. Such design features have been crucial to the success and political viability of social security, and they can be adapted and extended to protect Americans against some social hazards now under the aegis of public assistance, as my proposals in chapter 8 will show.