It is tempting to romanticise the creation of Social Security, but it was not the result of a kind nation coming together and sacrificing to help the poor aged. The Depression-era government set up a Ponzi scheme that would not unravel until all nearly all their voters died. A 58-year-old in 1938 would only have to contribute for seven years before collecting benefits. He could expect more than a 30% internal rate of return on his tax dollars, compared to someone today who will get less than 2% (assuming benefits are not cut).

It is time to overhaul the system entirely. Social Security was meant as a national saving scheme that would prevent old-age poverty and ensure the middle class a reasonable retirement income. It would better achieve those objectives by addressing them separately. Ideally we would have a two-pronged system: one to provide explicit welfare, the other a transparent saving vehicle.

via Free exchange: our economics blog | The Economist.

I must say it's nice seeing someone at The (kind of left-leaning) Economist saying this.