Book Review : The Social Security System: Authors Spark a Dull Topic

Social Security: The System That Works by Merton C. Bernstein and Joan Brodshaug Bernstein (Basic Books: $21.95; 307 pages)

For the last several years I have believed without hesitation that the U. S. government is running the largest pyramid scheme ever invented. It promises to give everyone more money than he or she put in, and it relies on drawing in more and more suckers at the bottom to pay off the people at the top.

When individuals pull this scam, they go to jail. When the government does it, it’s called Social Security.

Twice in recent memory--once during the Carter Administration and again during the Reagan presidency--Social Security has flirted with bankruptcy. Each time it was bailed out by tax increases, and each time it was declared sound, “well into the next century.” Sure.

I have not doubted for a moment that a quarter of a century from now, when my turn to collect comes around, the government is going to tell me, “We know we made this promise to you, and we know that you have paid in all of your working life, but what can we do? There is no money.”

But “Social Security: The System That Works” has persuaded me that I was wrong. This remarkable book is a paean of praise to the Social Security system, its philosophy, conception, administration and wisdom. “The future of Social Security is as solid and assured as any human institution can be,” proclaim the authors, Merton C. Bernstein, who was principal consultant to the National Commission on Social Security Reform in 1983, and his wife, Joan Brodshaug Bernstein.

In Better Shape

“Social Security is the lowest-cost, fairest, most adaptable and dependable vehicle for providing income substitutes to all the retired, the survivors and their families,” the Bernsteins go on to write.

And for good measure they add, “A shared universal system for social insurance that protects comprehensively serves a national purpose. No other program can do the job as well, or anywhere near as well, as Social Security.”

Not only do they demonstrate that Social Security is in much better shape than most people think, they argue further that private pension programs are in much worse shape. Despite the Employee Retirement Income Security Act of 1974, which sought to correct the abuses of private pension programs, “questions remain whether . . . protections suffice, whether plan reserves amounting to a trillion dollars, and far more in the future, are sufficiently safeguarded from unscrupulous or inept use, whether the tens of millions of families with a stake in those plans can rely upon them, and whether, even for those who achieve benefits, those benefits can be relied upon to supplementation expected.”

The Bernsteins have written a comprehensive description and analysis of the world of pensions, an extraordinarily important subject that sooner or later affects every working person and their families--which means everyone.

Unfortunately, despite the overwhelming importance of this subject, its details rank among the most boring topics around. The Bernsteins deal with broad public-policy questions--which are interesting--and they also deal with the nitty-gritty of actuarial assumptions and accounting--which are mind-numbing.

It’s not their fault. Nor is there any way around it. To make their case for the basic soundness and equity of Social Security, they have to present the facts. The mistake they made is in starting with these details and not getting to the broad public-policy questions until the second half of the book, by which time many readers will have gone on to less-tiring books.

Regardless of this structural flaw, the Bernsteins’ argument is compelling. The 1983 changes in the Social Security law, which greatly increased payroll taxes, have indeed made the system (exclusive of Medicare) fiscally sound. The trust funds are now accumulating surpluses that are estimated to reach $506 billion by 2015 and $12.4 trillion by 2030. These surpluses are intended to pay benefits to today’s workers--that’s you and me, brother.

But this creates another problem, which the Bernsteins dismiss in one paragraph: Will Congress be able to keep its hands off this money?

Democracy contains a structural flaw, which is that the people’s representatives cannot be prevented from bribing the voters with public money. Congress is incapable of saying no to any group of voters who come around with their hands out. That’s why Social Security got into trouble in the first place. That’s why we have $200 billion deficits.

As the Social Security surplus grows, there will be more and more claims made on that money--by pensioners and by others. Will Congress be able to resist these claims?

Don’t count on it.

But if, by some miracle, it can, the Bernsteins’ argument is persuasive. Social Security is a good deal for individuals and for society.