February 16, 2005
Questions two and three....
Professor Bainbridge has three questions for conservatives on Social Security reform. I'll leave number one to the economists, but I feel like I can answer two and three...
2. If we can achieve significant savings and ensure the health of the system with the changes mentioned in # 1, is there a non-ideological reason for introducing private accounts? Even proponents of private accounts concede that the transition costs will require trillions of dollars of government borrowing. Do we conservatives really want revenge on FDR and the New Deal at that price?
If you were starting Social Security today, would you not want private accounts? In fact, if you were starting ANY retirement or pension plan now, would you go for a "defined benefit" plan, or would you want a "defined contribution" plan? Of course you would want the latter. The big lesson of the 20th Century (after "socialism doesn't work) is "defined-benefit" plans don't work.
The "non-ideological" reason is: "better late than never." The thing was a botched job, so let's start fixing it and get things heading in the right direction. Even if there is no immediate crisis, the blob-creature is still going to be an endless drag on us. (And things could easily turn worse--imagine a big increase in lifespans, or a demographic collapse such as we see in Europe.)
It's not "revenge on the New Deal." It's the New Deal done the way it should have been done in the beginning.
3. Why aren't conservatives talking about other entitlement programs, such as Medicare, which reportedly is scheduled to go broke long before Social Security does?
For precisely the same reason we focused on Iraq, rather than tougher problems, like Iran, or easier problems, such as Syria. Social Security is probably do-able, yet is also difficult enough that success will have a transforming effect on the whole political landscape. Similarly the way people like Clinton or Krugman can be quoted as saying Social Security needs to be fixed is equivalent to the UN resolutions against Iraq. We have it on the record that there's a crisis. There is a widespread consensus that something should be done.
We are perfectly aware of the problems with Medicare. But that problem is both more difficult and less clear-cut. It's not psychologically ripe to to be tackled right now. A big win on SS however will make us feel like giants, and imagine that anything is possible!
Posted by John Weidner at February 16, 2005 11:08 AMSo you answer a fair question with another question? [If you were starting Social Security today, would you not want private accounts?].
Answer your own rhetorical question please. Why would YOU?
Consider some Gausian curve distribution of investment smarts. The right tail get's more, the left tail gets less. Isn't this what this is about: the rich get richer faster; the poor get poorer faster? The folks in the middle stay in the middle?
Must be Republican ownership heaven: all me no we: I got my Republican ownership society share, now you just try to get yours. You want a Ownership Aristocracy like a 19th C Brit landed gentry surrounded by peasants and paupers.
Posted by: Steve Harrington at February 16, 2005 01:20 PMThe analogy you draw in answering question #3 is one of the best responses I've heard. Let's just hope the battle over social security is a bit quicker and less messy than Iraq.
Posted by: Matt Leach at February 16, 2005 01:22 PMMr. Harrington;
I have yet to see any plan for mandated retirement funds that provide a wide variety of investment options. Most likely, they will be restricted to index funds and bond funds, for precisely the reason you state.
As for the "low hanging fruit" argument, that sounds very much like the civil service reform efforts that started in the Depart of Homeland Security, which is now spreading to other parts of the federal government.
Posted by: Annoying Old Guy at February 16, 2005 03:43 PMFrom one annoying old guy to another:
1. Restricted index and bond funds eh?
2. No public or private sticky fingers collecting holding or transaction fees?
3. Tell me again who owns this "private" account once the owner dies?
4. When you have a "private" account, you can't sell it borrow on it, claim it as an asset?
5. "Private" accounts fix the fund short fall in what year?
6. No bait and switch for younger workers you say?
7. Won't strip the pay-thru for those over 55?
8. No bennies for corporate cash flows?
Just the black hand of the market and no idiology right?
What I see is a flock of flying pigs looking for a tit to land on and suck dry. Hello! Grover Norquist starving the public "beast".
What a crock.
Mr. Harrington writes: "So you answer a fair question with another question? [If you were starting Social Security today, would you not want private accounts?].
Answer your own rhetorical question please. Why would YOU?"
Defined benefit plans like social security place enormous risks and responsibility on the provider. I think that's why social security and some corporate pension plans are in lots of trouble. Defined contribution plans make no promises. What you see is what you get, so it's up to the retiree to properly manage his/her assets. Those who aren't comfortable doing that are free to hire someone else to do it. Those who want the responsibility can do it themselves.
Posted by: David Aitken at February 19, 2005 01:47 PMThanks David.
It's hard for me to grasp that there are still people who haven't noticed the tens-of-thousands of news stories about troubles with pension plans, including a score or so European countries facing national catastrope in the near future.
And every one of those problems involves defined-benefit plans. It wasn't a rhetorical question, it was a platitude...
Posted by: John Weidner at February 19, 2005 09:50 PM
