In the “policy world”–the sector of society where most ideas are bad, dated, or both–the discussion centers on ways to go about ‘privatizing’ social security via individual accounts. The WSJ sought out a “liberal” and a “conservative” economist (will we ever get rid of these terms?) to debate the issue. But instead, what they found was that the two can only agree on this: Social Security should not be privatized. (Mises.org articles on this topic: 1, 2, 3, 4, etc.) Tyler Cowen states his case, in a nutshell:
I wish to privatize many things, but forced savings is not one of them. The so-called privatized accounts would be regulated rather than truly private in the libertarian sense. They will channel benefits to government-approved providers, thus leading to bureaucracy, regulation, and costly commissions. We could even imagine a government trying to direct those investment funds to particular sectors. And if anyone’s account goes bust, a secondary safety net would likely bail them out. What if the whole market went bust for about 10 years’ time, as it did in the 1970s? Imagine a replay of the S&L crisis but on a larger scale.I also worry about the fiscal implications of Social Security privatization. The proposed reforms limit the collection of “pay as you go” contributions and move people toward private accounts. But during the transition an influx of trillions, either from taxes or borrowing, would be needed to pay off the current elderly. In theory this is a revenue-neutral debt swap (we already have the implicit liability toward future retirees), but more likely the higher taxes or borrowing would stick with us over time.
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The key to these plans is that they often mandate higher taxes to pay for the transition costs (to pay for current retirees). In-so-far as these plans require this, I can never support them. I instead opt for Lew Rockwell’s suggestion: that those over 65 should never be taxed on anything again.
Assuming that the transition is funded by never taxing 65-and-overs again, I would support proposals to privatize social security. Of course, I am not a proponent of forced savings — and would advocate we just get rid of the entire SS system and give that money tax-free to people to spend as they wish; however, provided there is this kind of forced programs, giving people a legal title to the money taken from them would be better. In this case, I’d prefer it if people had complete control over where to place their money, but even regulated control is better than none at all.
I’d look at such a thing as a loophole.
What is truely depressing for me is the strident antagonism from Democrats to even Bush’s very modest “privatization” plan. If the stink they raised over that is any indication, I doubt anything approaching real liberalization would be passed by the government.
Fund something by not collecting funds??????
The problem with SS is the sales pitch, not the program. It is not a “fund,” is not a retirement fund, and is not a savings plan. SS is a universal welfare program and a capped, flat income tax.
(Whatever the reason behind the data)the latest AARP “Bulletin” claims that older African Americans have a poverty rate of 23.9% compared to 10.4% of the general population. Without SS, the numbers would be 58.2% of African Americans and 47.4% of all people 65 over.
Considering ONLY the general population, 47.4% of them lived through the most prosperous period the working people have ever seen and almost half of them failed to collect sufficient savings or assets to live a decent retirment even with SS. I claim this because the average SS payment is what? Around $800/month? The loss of $800/month should not be enough to force a person with a decent retirement into poverty.
If these people had the psychological inability to voluntarially save any money in the best of times in the USofA, someone please explain how they will have the psychological ability to voluntarially save money under any economic system and a less prosperous economy?
I claim “psychological” inability because saving is like tithing, independant of cash flow, depending only upon “will power.”
The thing that is most depressing about these kinds of lame ‘debates’ (kinda like two people trying to decide how to best save a drowning man while he yells for help) is that the conservatives, which have, in written word, been for ‘limited government’ (nobody’s explained what exactly that means yet), don’t really limit government. What, conservatives are for limited government because they want to abolish minimum wage? Oh please.
Even after so long with a Republican president (now going to be another four years) we haven’t seen a dramatic change for liberty. Exactly when are conservatives going to step up to the plate and do some serious (read: more than 80% of State activities) privatizing?
Don’t hold your breath… you might turn blue.
Well sure people haven’t saved enough to avoid poverty without SS. That’s because they’ve been paying SS all their life. Now if they saved only the 7% of their income the employee paid
and their wages kept pace exactly with inflation then over 45 year (20-65) they’d be able to save 11.17 years income. This is enough to give 55.89 percent of their previous income to them as interest which should keep them out of poverty. I haven’t caculated the figures with actual rising real income but they put people even further from poverty.
At last the details of this phony privatization scheme are becoming public, as with
this NYT story. “Proponents say the necessary amount of borrowing could vary widely, from hundreds of billions to trillions of dollars over a decade, depending on how much money people are permitted to contribute to the accounts and whether the changes to Social Security include benefit cuts and tax increases…. supporters of the accounts say borrowing even a few trillion dollars now would be worthwhile…”
In short, this is madness masquerading as freedom.
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