As of late there has been a lot of talk about Social Security and what to do or not to do about it. Some of that talk makes sense and some of it clearly does not, particularly when it originates at either of the far ends of the political spectrum and is therefore politically motivated.
Thirty years ago I wrote an article entitled, “Social Security – Is There a Solution?”, that was presented at a meeting for actuaries. It was included and made part of the Proceedings of The Conference of Actuaries in Public Practice, Volume XXXIII (1983-1984).
A recent item in the Wall Street Journal reminded me of the suggestions that I made in that article some thirty years ago.
The premise of my article was based on the following:
1. As the country begins to approach zero population growth (in order to achieve a higher standard of living), there will be less workers available to contribute to a pay-as-you-go retirement system such as Social Security. Gone are the days of huge families, except perhaps in lower income families. Simple arithmetic tells you that if keep the size of your family under control, you can expect to have an easier and most probably a better life style.
2. Social Security was never (as far as I know) expected to have an actuarial reserve to cover future contingencies.
3. The contributions to Social Security would never stay around long enough to develop any interest thereon.
4. When Social Security was first implemented there were perhaps as many as twenty five contributing workers for every retiree. In a few more years the number of retirees will approach (and eventually exceed) the number of workers or contributors.
5. Adjustments to the retirement age or the level of contributions would offer only partial or temporary solutions.
What does this mean? It means that at some point in the future (when depends on what ‘expert’ you talk to), Social Security will run out of money unless the taxable wage base or the tax rate or both are increased. But for how long can we continue to apply band-aids?
The only sensible solution to the inevitable problem of running out of money would be for the government to make contributions to Social Security in the form of land that it owns (or manages) on behalf of the people.
We can manufacture cars and anything else and build houses and even pile them all on top of each other. But the one thing that we cannot manufacture is land. What we see is what we get. That means, that as time goes on, land, even swamp land, will eventually become worth more than it is at the present time.
The Federal Government together with the Bureau of Land Management has, owns, controls, is the guardian or custodian of (take your pick) in excess of 250,000,000 acres of land.
Thirty years ago I wrote, “The credits to Social Security from the Federal Government would be in the form of government land. By utilizing the transfer of real estate credits, whose future value is yet to be realized, Social Security should be able to establish a reasonable actuarial reserve. These holdings of real estate……….would represent the future of Social Security and the country, for it is the only commodity we have for which there is a finite supply and which should increase in value at a rate at least equal to and most likely in excess of whatever the rate of growth and/or inflation is.”
If an acre of vacant land is presently worth $1,000 and if it increases in value at the rate of 10% per year, it would be worth $2,594 after ten years and $6,727 after twenty years and $17,449 after thirty years.
Then what? Social Security would, at the appropriate or even a pre-determined time, sell off selected parcels for development to the highest bidder.
Who would oversee this conversion of Social Security land into cash? We shouldn’t expect that our existing army of civil service employees would assume this awesome responsibility and we certainly would not want our politicians to get involved.
This is what I suggested thirty years ago.
“The President of the United States would make a personal appeal to the leaders…………….of our industries and labor unions……….to volunteer their efforts and wherever possible their facilities, at no cost to the government, in order to achieve a common goal that would benefit the entire country……………..This blue ribbon consortium of the best business minds in the country would have the awesome task of sorting out and analyzing…………….and report its recommendations directly to the President of the United States…………….A quasi-government agency would be established to oversee and direct…………..said agency to be run by our blue ribbon consortium.”
Is such a plan feasible? I don’t see why not. The land that I speak of will eventually be sold off regardless and the funds would go into the general fund of the country to be used for all kinds of projects. This way, the land would become the property of Social Security which would be used exclusively for the benefit of everyone who expects or plans to receive a retirement benefit when they reach the normal retirement age under Social Security.