Social Security Reform

Rekaar. · Post by **Rekaar.** » November 18, 2004, 8:37 pm

http://www.ncpa.org/prs/rel/2004/20041107mm.htm

At the first press conference after his re-election, President Bush outlined the agenda for his next four years. When asked about the timeline for fulfilling his chief domestic campaign pledge to reform Social Security, the president replied, "We'll start on Social Security now. We'll start bringing together those in Congress who agree with my assessment that we need to work together. We've got a good blueprint to go by."

The president's declaration should signify to everyone that Social Security is no longer the third rail of American politics. And that's a good thing. We younger workers were finally starting to notice that the system's $11 trillion long-term debt will come out of our pockets unless we do something to set the program on a fiscally sound track.

So what should we expect from the president? What's this "blueprint" he referred to? Back in 2001, President Bush assembled a 16-member bipartisan task force chaired by the late Sen. Daniel Patrick Moynihan, New York Democrat, to study Social Security's problems and find a way to allow today's workers to prefund part of their retirement benefits and reduce the system's long-term debt.

In December 2001, the president's task force delivered a couple of different plans to do just that. The most prominent plan, often referred to as "Model 2," would create personal retirement accounts, which would allow younger workers to set aside part of their income in a personal account they can own and control, and will pay part of their benefits at retirement.

Model 2 does not in any way affect current and near retirees; they would continue participating in the current system and receive scheduled benefit levels and cost-of-living increases. Under Model 2, a participating worker could invest in a personal retirement account by diverting 4 percentage points of the 12.4 percent payroll tax he and his employer already pay. The worker's expected benefit from the current Social Security system would be reduced by some factor based on what the worker accumulates in his account. As workers with personal accounts begin retiring and drawing a portion of their benefits from the accounts, the burden on future taxpayers would be significantly reduced.

Would the president's plan work? Shortly after the commission finished its work, actuaries at the Social Security Administration examined the plan. Their conclusion? While the plan would require an initial infusion of funds -- some $2 trillion over the next several decades -- the plan saves about $11 trillion and sets the program on a path to fiscal sustainability.

Readers should note: Social Security benefits under a reformed system should be compared to what Social Security can currently afford, not what it promises. The reason? The program can't meet its promises without a cash infusion of an extra $11 trillion. If we compare reformed benefits to what Social Security promises, we unfairly give the current system an $11 trillion "leg-up" in the competition.

The SSA says a median earner ($35,277 in 2002) Gen-Xer retiring in 2042 would receive a monthly benefit of $1,392 under Model 2, which is 128.8 percent of what Social Security can afford under the status quo. A low wage earner ($15,875) retiring in 2042 would receive a monthly benefit of $986 under Model 2, or 150 percent more than under the status quo, thanks to his personal account and the new minimum benefit rules included in Model 2.

Some people worry about the details -- administrative costs, low-income workers and inexperienced investors. But the Social Security Administration, the Government Accountability Office and the Congressional Budget Office show ways the accounts can be structured to keep administrative costs low, prop up the lower-income workers' accounts and protect inexperienced investors.

The president is ready to get started on his second-term agenda. It looks like Social Security reform will be a top priority. The president's approach is not risky or scary. It is well thought out and fair.

Think it will work?

Zaelath · Post by **Zaelath** » November 18, 2004, 10:22 pm

I see a lot of "allowing" people to self-fund their retirement.. if that means it's voluntary, then no it will be a massive failure.

<insert self-righteous claptrap about God helping those that help themselves and it being completely wrong for the government to force you to do the right thing>

I'd just make very sure that my retirement fund wasn't investing in, or able to be touched by the government if I was ya'll....

Rekaar. · Post by **Rekaar.** » November 18, 2004, 10:53 pm

Zaelath wrote:I'd just make very sure that my retirement fund wasn't investing in, or able to be touched by the government if I was ya'll....

Isn't that exactly what it's like right now...?

Zaelath · Post by **Zaelath** » November 18, 2004, 11:04 pm

WASHINGTON (CNN) -- This year's federal budget surplus has plunged to $153 billion because of the nation's economic doldrums and the Bush administration's tax cut, meaning the federal government will have to cover $9 billion of spending by dipping into Social Security, the nonpartisan Congressional Budget Office projected Tuesday.

That would seem like Bush spending your retirement fund to me. Remeber, it's your money, the man himself loves to say that while he's raiding social security to give tax breaks to his cronies.

Voronwë · Post by **Voronwë** » November 19, 2004, 11:32 am

personally, i'd rather have my FICA to invest on my own, yeah. i'll make a ton more with it myself. that being said, i want real options, not powerful companies who contribute to the GOP getting the deals to handle the funds, and taking fat 1.8% commissions/fees.

Chidoro · Post by **Chidoro** » November 19, 2004, 11:49 am

The real problem with it is that the majority of people have no clue how to make money work. Since the money is supposed to be a guarantee upon retirement that you won't be completely destitude (not even poverty which still happens today).
If I'm a financial planner, I'd be licking my chops at the sucker potential. Hell, like Vor, I know I'd do much much better with my own money. But this would really put the fiscally challenged middle and lower classes at a huge disadvantage. Oyy, 30-35 years from now when Bush Jr is on his very fancy deathbed only will he realize jut how financially fucked the bulk of attempting retirees are.

Tenuvil · Post by **Tenuvil** » November 19, 2004, 1:13 pm

Voronwë wrote:personally, i'd rather have my FICA to invest on my own, yeah. i'll make a ton more with it myself. that being said, i want real options, not powerful companies who contribute to the GOP getting the deals to handle the funds, and taking fat 1.8% commissions/fees.

Yes but Voro you're smarter than the average ~~bear~~ American. If you left Joe Sixpack to make his own investment choices he'd lose his shirt and then turn around and blame Uncle Sam.

I agree with what you're saying; however, the ability to direct your own FICA investment choices should not only be voluntary but one should need to prove they are reasonably competent with finances in order to do so.

Voronwë · Post by **Voronwë** » November 19, 2004, 2:03 pm

i dont disagree with that. i think as Chid said the Financial Services Industry will be circling the masses like Sharks to chum.

Seebs · Post by **Seebs** » November 19, 2004, 2:05 pm

Guyys, I'm 38 and put 17% of my salary into 401K. Why so much? I don;t think SS will be there when I want to retire.

Such is life. Take care of yourself and sep over those that failed to do likewise.

Compassion is for the weak.

Voronwë · Post by **Voronwë** » November 19, 2004, 2:21 pm

well thats all fine and good, and i am not looking for SS to give me more than $5 a month when i'm old. but it may be cheaper on public infrastructure (hospitals, all of our health care premiums) to have some sort of SS.

its like issues with healthcare now, the costs of the uninsured are passed on to the insured, even though we "pay our own way". The hospital cannot absorb the costs, so it bills our Insurers $10 per Tylenol. Our Insurers arent going to absorb the cost, so they spread it out across our premiums.

So we may end up paying regardless.

Chidoro · Post by **Chidoro** » November 19, 2004, 4:15 pm

Seebs wrote:Guyys, I'm 38 and put 17% of my salary into 401K. Why so much? I don;t think SS will be there when I want to retire.

Such is life. Take care of yourself and sep over those that failed to do likewise.

Compassion is for the weak.

That's pretty stupid. It's stupid for a couple of reasons.
-your 401k is through a firm your employer decided upon. They went through a specific criteria, have a specific philosophy behind the investments, and are accountable if they fuck up. This is NOT the situation giving people a check willy nilly, will be privy to.
-there are a shitton of people not offered 401k's through work. They would have to have even a slight inkling about IRA's run through their bank. And since the deposits aren't steady, there's no guarantee they will be made.
-the check will be due. Everyone will be responsible. Vor's example of the status of healthcare is a perfect correlation

You're much better at handling funny/sick stories than economic reasoning

Aabidano · Post by **Aabidano** » November 19, 2004, 4:21 pm

Tenuvil wrote:If you left Joe Sixpack to make his own investment choices

Lottery tickets!

I've made a profit every year on my 401k, of course I don't have a cent invested in the sector I works in

Tenuvil · Post by **Tenuvil** » November 19, 2004, 4:22 pm

Chidoro wrote:
Seebs wrote:Guyys, I'm 38 and put 17% of my salary into 401K. Why so much? I don;t think SS will be there when I want to retire.

Such is life. Take care of yourself and sep over those that failed to do likewise.

Compassion is for the weak.
That's pretty stupid. It's stupid for a couple of reasons.
-your 401k is through a firm your employer decided upon. They went through a specific criteria, have a specific philosophy behind the investments, and are accountable if they fuck up. This is NOT the situation giving people a check willy nilly, will be privy to.
-there are a shitton of people not offered 401k's through work. They would have to have even a slight inkling about IRA's run through their bank. And since the deposits aren't steady, there's no guarantee they will be made.
-the check will be due. Everyone will be responsible. Vor's example of the status of healthcare is a perfect correlation

You're much better at handling funny/sick stories than economic reasoning

Seeber, you'd be MUCH better off putting whatever the max your employer will match (usually 5%) into your 401k and investing the rest into solid mutual funds. Make sure to diversify well once you get a good base going.

Winnow · Post by **Winnow** » November 19, 2004, 4:46 pm

Max your IRAs if you can each year.

Retirement is simple if you follow this rule:

Alway put 10 percent of your earnings toward retirement and you'll have millions when you retire even if you make a modest income your entire life. The IMPORTANT part is starting in your early 20's. You're so screwed if you start late. The 10 percent that you have to put aside increases each year you wait to start saving.

Rekaar. · Post by **Rekaar.** » November 19, 2004, 5:58 pm

Why is the fundamental argument against this the concept that everyone else is dumber than you are?

Lalanae · Post by **Lalanae** » November 19, 2004, 6:01 pm

Rekaar. wrote:Why is the fundamental argument against this the concept that everyone else is dumber than you are?

could be that most people in the US ARE less intelligent that the folks here? I think that's a pretty fair assessment.

Rekaar. · Post by **Rekaar.** » November 19, 2004, 6:04 pm

Based on what? That's a totally unfounded and arrogant claim.

Lalanae · Post by **Lalanae** » November 19, 2004, 6:11 pm

You've either obviously never dealt with the general public or you share the same level of intelligence as the general public ....

Seebs · Post by **Seebs** » November 19, 2004, 6:18 pm

/shrug

Never claimed to be an economist and my financial advisor is handling all that. Company matches first few percent and the rest are split between four seperate mutual funds.

My rollover is assigned to different sectors.

My point is that I should be fine when I retire. Not that I will be filthy rich and have more plat that joo.

the fact that some of you get so bent and make any post like this a competition says a ton about your worth. Pitiful really.

Now go be rich and pissed. I'l lbe fine and entertaining the masses.

Voronwë · Post by **Voronwë** » November 19, 2004, 6:22 pm

actually Rekaar that is not the relevant distinction. It makes no difference how closely the VV population mirrors the population at large. I doubt it does, since only a discreet group of people would ever know such a place exists, a group that is largely white and for the most part between the ages of 15-35.

what is relevant is what percentage of the population invests money for retirement. through 401k, through IRAs, etc.

it took me months to convince some of the lowest paid members of my department to invest up to the company match for their 401k. It isnt because they are stupid, but because taking 4% of their pretax earnings out of their monthly paycheck has a measurable impact on their recreational spending.

I am sure that the vast majority of people who make over $45,000 do some degree of retirement planning. Obviously as income scales upwards, the utility of social security as a substantial source of income to maintain lifestyle becomes less.

I know personally this SS reform would help me. My concern is whether or not it would actually be beneficial to the bulk of the population. I am also concerned with how we would fund the people who have yet to retire, since the structure is that those of us paying in now are funding those who are withdrawing now. It was never structured to be able to easily dissolve.

Anyway, i'm certainly interested in reform options, as long as it isnt the financial services industry enjoying disproportionate advantage to the population.

Seebs · Post by **Seebs** » November 19, 2004, 6:24 pm

Um .. I check a box on my form. Um .. is that okay?

Voronwë · Post by **Voronwë** » November 19, 2004, 6:26 pm

actually i need you to resubmit the form to me, and i'll need your signature and a voided check.

thanks!

Chidoro · Post by **Chidoro** » November 19, 2004, 6:33 pm

Rekaar. wrote:Why is the fundamental argument against this the concept that everyone else is dumber than you are?

I don't think you get it (not a big shocker though).

People aren't smart in money.
There are people who make very good livings that don't understand the first thing about how money really works. I bet you don't know much of anything about how to truly make money work for you. It's ok though, most people don't. They aren't stupid. Some just are never taught. They don't teach it in school. They don't teach it if you're going to be a computer service rep, a secretary, a construction worker, hell even an accountant.

Winnow's assessment of how to save for retirement, while not inherently wrong, is a very simplistic and rather flawed approach to true earning potential, now and for retirement. And even THAT is if you're fortunate enough to work someplace that offers a 401k (or 403b, et al.) and especially if your company offers a match up to X percent.

People really think my wife and I make a huge sum of paycheck income each year. While we are certainly up there (albeit living in Jersey scales that somewhat), it's that money has been working for me for most of my working career and my wife going back to when we were dating.

Basically it breaks down to this:
There are some people who make upper middle class livings who struggle paycheck to paycheck
There are some people who have very average livings who struggle even more
There are those that are below average who REALLY struggle

That's the majority of America. Most of those people who fall into any of those categories have no clue how to manage their money. Now you're going to give that power to them using what's supposed to be a GUARANTEED income upon retirement.

Sorry. But you and the other 95% of America will be struggling (or even worse, think they have made out ok) upon retirement. And if you're fortunate enough to really make out, you'll be assiting all of the people who didn't and not necessarily because of their own fault.

Again, your simpleton view of what really occurs seems to prevail on every facet of your party's crowing

Seebs · Post by **Seebs** » November 19, 2004, 6:44 pm

I don't know where you live Chidoro ... but you should move to a better neighborhood.

Chidoro · Post by **Chidoro** » November 19, 2004, 6:51 pm

So when faced with the true problem of putting a plan like this into effect and screwing over the debts yours and mine yet to be born child, that's what you can come up with?

Think about why the plan will actually be a problem.

Tenuvil · Post by **Tenuvil** » November 19, 2004, 6:55 pm

Rekaar. wrote:Why is the fundamental argument against this the concept that everyone else is dumber than you are?

The fundamental argument against this concept isn't based in arrogance or elitism, you fucking asshat, but in competence. I'd get more into this but Chidoro said much of what I intended to.

As far as the average intelligence of the population of VV, YOU pull us down. When I see the twaddle you post, I can say with all certainty that most of us here are appreciably smarter than you.

Rekaar. · Post by **Rekaar.** » November 19, 2004, 7:02 pm

Aside from the total absurdity of your opinions, my response was agreed to by the person it was asserted at was it not? Somehow, ironically, you call me stupid simply because we disagree on something.

Not arrogance nor elitism indeed.

Tenuvil · Post by **Tenuvil** » November 19, 2004, 7:23 pm

No Rekaar, I call you stupid because you are. It's calling an ace an ace. It's looking at something and seeing it for what it is.

What makes calling you a fucking dumbass ironic? I'd call it self evident.

I have no problem with differences of viewpoint or opinion. However when people are discussing why it's a bad idea to let the average American manage his own Social Security investment, and you chime in with your tired "why do you think the average American is dumb?" bullshit, which by the way is not what ANYONE here was saying, that's not a difference of opinion, nor was it posed that way by you. That's being a fucking gimp retard.

And please excuse me, I thought you "asserted it at" the forum in general.

Rekaar. · Post by **Rekaar.** » November 19, 2004, 7:39 pm

your own contradicting self wrote:Yes but Voro you're smarter than the average American. If you left Joe Sixpack to make his own investment choices he'd lose his shirt and then turn around and blame Uncle Sam.

People aren't smart in money.

My concern is whether or not it would actually be beneficial to the bulk of the population.

could be that most people in the US ARE less intelligent that the folks here? I think that's a pretty fair assessment.

You've either obviously never dealt with the general public or you share the same level of intelligence as the general public ....

Calling a spade a spade, I think someone said. Infuriating to put your foot in your mouth like that I imagine. =/

Forthe · Post by **Forthe** » November 19, 2004, 9:55 pm

Okay Rekaar I'll try to explain the problem.

The issue really isn't that we think people are dumb and can't handle their own money so we need to take care of them for their own good. While we may actually believe that, it isn't the real motivation.

The real motivation is the risk to our own financial well being if a sizable portion of the population does not handle their money correctly. By making a minimal retirement income mandatory we guarantee that these people will not become a drain on our economy later on (or at least minimize it to an extent).

If everyone lived in a nation of 1 where other people's finances didn't effect each other people wouldn't give a damn.

Tenuvil · Post by **Tenuvil** » November 19, 2004, 10:45 pm

HAY WOW GUYZ I CAN USE THE SEARCH FEETURE AND QUOTE OUT OF KONTEKST!!1

Grats you.

You're still a tool.

Rekaar. · Post by **Rekaar.** » November 19, 2004, 10:49 pm

Forthe wrote:Okay Rekaar I'll try to explain the problem.

The issue really isn't that we think people are dumb and can't handle their own money so we need to take care of them for their own good. While we may actually believe that, it isn't the real motivation.

The real motivation is the risk to our own financial well being if a sizable portion of the population does not handle their money correctly. By making a minimal retirement income mandatory we guarantee that these people will not become a drain on our economy later on (or at least minimize it to an extent).

If everyone lived in a nation of 1 where other people's finances didn't effect each other people wouldn't give a damn.

This is an argument I can agree with Forthe. I think limiting which investments are ok and which are not - for this portion of investing - would be a better solution than leaving the system as is and heading down the road to total collapse.

Bold added to show Tenuvil is being a slobbering fool

Marbus · Post by **Marbus** » November 20, 2004, 12:04 am

<Marb's predictions>

Note this date: You can argue all you want about intelligence, greed etc... but I promise you this. If we privitize social security the US will fail as a nation within 100 years.

I say this because the world has become socially dependent on one another, the US espeically. You can believe that no one ever did anything for you, you paid for everything, you made your own money etc... and you can also be a fool. Everyone in this country is directly affected by those around them, for good or ill. If we loose the middle class, which will happen without social security, we will fail.

Now, if we educate people on how to invest for the next 75 years then it might work after that. However the general population hasn't been taught how to plan for retirement and there is not time to teach most of them before they retire. We MUST have our working class and we must take care of one another if we are to all benefit from the future.

Of course it could just be that Marx was just right on track... he knew that greedy bastards would eventually gain power and bring great nations to their knees, at which point the working class will revolt... I pray that never happens. I pray that we can eventually get the self-rightous greed mongers out of power before it's too late... laugh if you want, make snide remarks if you want but anyone who takes the time to truly study history can see the road we are on as plain as day... many just don't want to admit it because they "doing well"...

Marb

Kylere · Post by **Kylere** » November 20, 2004, 1:36 pm

I do not give our current world situation 100 years of stability, so Marbus is right, but for the wrong reasons.

OIL baby, it is all about cheap energy production, get ready to farm every available space by hand soon.

Seebs · Post by **Seebs** » November 20, 2004, 2:36 pm

MArb. I love you in spite of your flaws.

Marbus · Post by **Marbus** » November 20, 2004, 11:29 pm

I was just talking about the US and I should have put 50 which I initially did but change it to make sure I would be correct

Love ya too Seebs

Marb

Mplor · Post by **Mplor** » November 21, 2004, 6:13 pm

Marbus wrote:<Marb's predictions>

Note this date: You can argue all you want about intelligence, greed etc... but I promise you this. If we privitize social security the US will fail as a nation within 100 years.

I say this because the world has become socially dependent on one another, the US espeically. You can believe that no one ever did anything for you, you paid for everything, you made your own money etc... and you can also be a fool. Everyone in this country is directly affected by those around them, for good or ill. If we loose the middle class, which will happen without social security, we will fail.

Now, if we educate people on how to invest for the next 75 years then it might work after that. However the general population hasn't been taught how to plan for retirement and there is not time to teach most of them before they retire. We MUST have our working class and we must take care of one another if we are to all benefit from the future.

Of course it could just be that Marx was just right on track... he knew that greedy bastards would eventually gain power and bring great nations to their knees, at which point the working class will revolt... I pray that never happens. I pray that we can eventually get the self-rightous greed mongers out of power before it's too late... laugh if you want, make snide remarks if you want but anyone who takes the time to truly study history can see the road we are on as plain as day... many just don't want to admit it because they "doing well"...

Marb

Exactly.

Privatizing SS will let a portion of retirees increase their stipend, but another portion will see reduced stipends. That second group will become a cause celebre and eventually we'll wind up building a social safety net for those who fell through the cracks of the current safety net, Social Security. In other words, this won't solve anything. What a foolish idea.

Aaeamdar · Post by **Aaeamdar** » November 21, 2004, 7:53 pm

This is one area I fully support Bush on, though frankly he does not go nearly far enough. SS needs a 100% opt out at a minimum. Preferably they should just do away with it entirely, take the hit (American Taxpayers) for current beneficiaries and those sufficiently vested in the system (20 years? 15 years? - something). For everyone else they should send them a check, with a reasonable interest rate, for their entire "contribution" and then be done with it. (That one time check should also be an option for those recieving or sufficiently vested as well). I think (hope) that Bush's mild reform plan is the first step in doing this. At any rate, getting to the point where slogans like "I'll put it in a lock box" are done is a great service to American politics.

I understand the comments above about people who make very little money not being willing to save. Well frankly that is their choice. If they don't save and their family won't take them in, then they don't retire. No big deal. There are all sorts of establishments looking to hire people for low wages. The elderly can fill those jobs instead of teenagers. This is not an issue the government needs to solve for people.

Rekaar. · Post by **Rekaar.** » November 22, 2004, 12:34 am

You're right, but we also can't go back to that after building 3 generations of welfare recipients.

Aaeamdar · Post by **Aaeamdar** » November 22, 2004, 4:14 pm

Welfare and Social Security are largely unrelated, except to the point that SS might keep some elderly off of welfare. At any rate, the "3 generations" of people recieving welfare certainly never put a dime in, nor take a dime out, of social security.

Rekaar. · Post by **Rekaar.** » November 23, 2004, 1:28 am

I should calrify that, I'm referring more to the mentality of relying on the government for survival.

Chmee · Post by **Chmee** » November 27, 2004, 3:56 pm

Meant to respond to this a bit ago but didn't have time.

I do like that Bush has at least addressed that something needs to be done to Social Security (which is a lot better than most have been willing to do). Private accounts do have some beneficial features. They are likely to give a better return than the current system. The money will actually be tied up in the accounts and hopefully not as feasible to be used to fund other government spending (like social security has). At one time I would have supported the plan, now I am not so sure though. Tyler Cown has had a number of posts over at the marginal revolution blog on the issue that bring up some good points.

http://www.marginalrevolution.com/margi ... opt_f.html

Should we opt for forced savings?

Arnold Kling, Brad DeLong, Jane Galt, Matthew Yglesias, Ed Prescott all flirt with various versions of the forced saving idea, typically in the context of social security reform. Should government, even as a second best solution, require individuals to put aside a certain percentage of their funds for retirement? This is not "pay as you go," we are talking about individual lockboxes.

The idea tempts me but I must decline.

First, how much can our government force people to save in the first place? You can make them lock up funds in an account, but they can respond by borrowing more on their credit cards, taking out a bigger mortgage, and in general investing less in their future. The net increase in savings will be much less than the mandated increase. And this will make it much harder to avoid the welfare aspect of social security.

When do the savers receive true property rights over the funds? Surely not at 65. They could then spend it all and apply for the dole. We are back to letting people starve or constructing a secondary safety net; the latter is almost certain to happen, although that was precisely what the forced saving scheme was trying to avoid. Alternatively, the government could regulate how much a person can spend from the lockbox each year (must it limit your borrowing too?). Imagine being on the verge of death and petitioning the government to spend down your account to meet your medical bills or make a large donation. The complications are not encouraging.

Let's put aside the parallels with IRAs and the like. Those plans work as they do because we already have a safety net in place for the elderly. And note that Chile (and many other countries), which has "privatized" its social security plan, maintains a secondary safety net as well.

Private accounts meet further problems if people live for a long time. What about the woman who survives to 105? It is impractical to force everyone to save enough to last until that age. So either the 105 year olds starve or we are back to the secondary safety net. Perhaps you are a libertarian who thinks none of these people will starve; still I predict that the political pressures for public assistance will be overwhelming. We will end up with both forced savings and a welfare system.

Ed Prescott suggests that private accounts would lower marginal tax rates on labor by lowering the current payroll tax. But while the payroll tax is lower, the newly created "forced savings tax" is higher. Fewer toys, less hard work. The net tax distortion likely falls to the extent that the private accounts do not occasion any redistribution of wealth (impatient or not, you keep what you put in, instead of losing it altogether). But then Prescott's real point becomes transparent. A social security system with no transfer aspect involves a lower resource burden. This is true, but hardly news and hardly a strong argument against welfare per se. Put the transfers back in, and there is no guarantee that the real resource burden falls.

Yes there are some good arguments for forced savings, as Brad DeLong has pointed out. But they are the least libertarian arguments available, namely that we should have forced savings, as a means of instituting government allocation of capital, and a large safety net. The most robust libertarian argument is simply the view that we should not coercively transfer wealth to the elderly poor. And this I cannot imagine sticking as policy. I stand where I started, namely that social security should evolve into a welfare system for the elderly, but without the forced savings component.

Some good observations in there. There is also the potential problems of having the potential of side effects to the forced investment. Most likely to avoid risk and having people wipe out their savings the private accounts would be invested in a broad based index. That still leaves some room for problems with what goes on the index, or how it is set up. Even if that is done completely neutrally, it is still pumping a lot of money into the investment market that people might not have otherwise chosen to spend that way, which may have distorting effects.

I think Cowen may be right, that social security evolving into a social security system for the elderly may be the best option (at least of any policy proposals that actually stand any chance of being implemented in the forseeable future).

Rekaar. · Post by **Rekaar.** » November 29, 2004, 2:51 am

The simle fact that the money would net greater returns in a privatized system is enough to get me interested. It means more money being made in the US, and more money to eventually spend (and invest in business).

Letting it "evolve" into a welfare system to the elderly is pretty vague. At face value I don't see that as any different than it is now.