The election is over; there are winners and there are losers. But our country goes on. And the business of government at all levels must go on as well.

As always, the time now comes, over the next months and years, when every politician and all the parties must come to grips with the reality of implementing the promises that they made during the campaigns. Some promises will be kept. Some promises will be broken. Some promises were never realistic in the first place.

At the national level, although the Republican victory was decisive, it will not be clear sailing for legislation because the majority still lacks the 60 votes necessary in the U.S. Senate to permit forcing key bills and key appointments through Congress. Because I believe that a true two-party system is good for the country and because I believe that total dominance of the executive and legislative branches threatens our system of governmental “checks and balances,” I think that this potential for “obstruction” as some will call it, is a good thing. Nevertheless, the president should be able to implement a substantial number of his programs and fulfill many of his campaign promises.

One of the issues which attracted a good deal of attention during the campaign was the fate of Social Security. I have to confess that I, personally, lost faith in the Social Security system more than a decade ago and have done my retirement planning on the assumption that I would ultimately receive no benefits. But I still worry about the fate of the system because tens of millions of Americans do count on receiving retirement benefits from Social Security and I fear the consequences of a default. I agree with the president that something must be done, but I disagree with his solution. (I also disagree with Sen. Kerry’s proposed solution.)

Outdated assumptions

The fact of the matter is that the assumptions upon which Social Security was constructed have been outdated for decades. Social Security no longer operates as an investment-based system. It is a transfer tax: Workers pay Social Security taxes which are used to fund retirees’ benefits.

Even more problematic is that the generation just beginning to retire is far larger in numbers than the generations that will continue working, and retirees are living far longer, on average, than they did when the system was first established. The result is that too many people are expecting Social Security checks for a far longer period than was contemplated.

Further there will be fewer workers to fund those checks. The expectations of older workers (based on promises made to them over the years) can only be met by substantially increasing the burden on younger generations significantly beyond what it is currently. The only other hope for the system is that the economy will grow so fast that it will cover these growing costs by growth alone. In my opinion, this is unrealistic.

Privatization

The president’s solution to this is partial privatization. I fear that this simply won’t work and a simple corporate analogy explains why. Social Security is now a version of what lawyers call a defined benefit plan. The worker makes a contribution and is promised that he or she will receive a set benefit upon retirement. The risk that the investment will not reach a level sufficient to fund the promised benefit is on the payer not the individual. In the case of Social Security that means that the government bears the entire risk of meeting promised benefits.

Privatizing a portion of Social Security and giving the money to workers to invest means that the worker has control of the money but also must now bear a portion of the investment risk. In effect, the system changes from a defined benefit system to a defined contribution system. Risk of investment loss switches from the government to the individual. If the individual’s investment strategy fails, the individual receives less when he or she retires.

If one believes that individuals can invest over the long term and receive a better return than the promised payout under the current system, then privatization is a good thing for individuals. If they can’t, it isn’t.

The question is not whether individuals can get a better investment return than the government, since the government has to pay the promised benefits regardless of how well it invests workers’ money. The question is whether individual workers can achieve better results than the guaranteed benefits promised under the current system. It is my strong belief that many, if not most, cannot.

What this means is that if the president’s plan goes into effect, it is younger American workers who face the possibility of receiving substantially lower retirement benefits than they would have received under the current system. Of course, this is only true if the current system can avoid bankruptcy, which may not be possible without substantially increasing the Social Security tax.

Only for the needy

What’s my solution? Brutal honesty. The fact is that what we pay into Social Security is a tax. Higher income workers and those who have adequate private pensions simply ought not receive any benefits (or at least reduced benefits). In effect, I believe that we ought to accept that the Social Security system safety net is there for those in financial need only and make receipt of Social Security benefits depend upon income level. The higher the retirement income from other sources, the lower the benefit available.

What this means, of course, is that higher-income retirees will never get back their Social Security contributions. We already do this now, to some degree, by taxing the Social Security benefits of higher-income individuals. But we need to go further and accept that the system cannot function as an adequate safety net unless we make it means tested. But, then again, such an idea would be political suicide. That’s why it doesn’t have a chance. And that’s why I have based my retirement plans on the assumption that I’ll never get Social Security benefits.

— Mike Hoeflich, a professor in the Kansas University School of Law, writes a regular column for the

Journal-World.