in the 1930s-ish, the old were the poorest sector of the economy (with the possible exception of the dependent young). A large sector of the population hadn't gotten to the point where they really had much options for setting aside money to live on in the "silver years" AND for the first time nuclear families were REALLY emerging, where children basically said sianara to their parents and grandparents and aunts and uncles and not only set out on their own, but also stopped contributing much to the elder generation's continuing survival (or at least AS much... as in having them live with you as the generally accepted rule, since after all-- in the really olden days you probably were living in what USED to be your folk's home).
So old people were poor, and dying in destitution.
Enter social security, a safety net to ensure that old people would have the barest minimum to survive on, and not be destitute. Then several things happened. First, in order to sell it... the rich were both not excluded from benefiting AND were promised that only their first $x would be taxed to pay for it (so the program shifted considerably away from a program to save people from destitution towards the highly regressively taxed transfer situation that Alex talks about). PLUS it turned out that the taste of this system galvanized cranky old people into one of the most brutally effectively cordoned beneficiary groups in the history of history. Old people got BRILLIANT at lobbying for themselves. Best ever, frankly. So benefits expanded and it shifted even MORE towards the straight transfer of income from the poorish young to what has since become the RICHEST segement of the economy, the old (they are basically now all mongomery burns and "mr. potter" from its a wonderful life)
anyway, so there we are it went from a social safely net to prevent destitution, to a "retirement plan" that helps ensure that the elderly will be able to afford that cabin in the poconos they always wanted without having to give up their upper east side flat.
Question: Is it still useful to have it?
I think it is. I would be happy shaving off a bunch of the added on benefits. But I think it is good to have its original purpose (rescue from destitution) AND it is also good to have a non-cyclical guaranteed small annuity. We have our 401-k's (most of us)... but MINE lost 50% of its value in the last 7 months, had I been 68 years old.. THAT would've really bit me in the ass!
but there is significant room for reform... of course. Do we (as a country) have the fortitude to stare down the AARP and make the necessary reforms? probably not.
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