First of all, I must apologize to a couple of readers who sent me links to stories or posts on SS yesterday: something screwy happened with my computer and then my wife needed it for, you know, “real” work.
From the Boston Globe: “Kudos and caution voiced at economic summit”:
A White House-picked parade of specialists lauded President Bush's policies at an economic summit yesterday, but some peppered their praise with warnings that the economy could tumble unless the White House comes up with viable plans to overhaul Social Security and halve the deficit.From the NY Post: “Are you too dumb to invest?”
Martin Feldstein, the Harvard University economics professor who has been mentioned as a candidate for chairman of the Federal Reserve Board, said the economy was on solid ground. But he warned: ''If Social Security is not reformed, the payroll tax required to finance benefits would go from the required 12 percent to about 20 percent."
In an interview, Feldstein said Bush and the Congress are not likely to approve any such increase, but he said other measures such as the private investment account should be adopted soon. ''The longer we wait, the more nervous I get," Feldstein said later. ''The fiscal problem of dealing with the aging population is the most serious problem.
The upcoming debate will reveal the core differences between Republicans, who believe most Americans can manage a portion of their Social Security in private accounts, and Democrats, who think most Americans are just "too dumb" to handle the responsibility. Thus, those same Democrats will fight any form of privatization tooth and nail.The Volokh Conspiracy takes this one step further with “Is Social Security ‘Stupidity Insurance’?”
It is not clear to me why a 64 year-old cannot be trusted not to invest his social security entitlement in the stock market wisely prior to retirement, but can be trusted as a 65 year old post-retirement to spend his money wisely. So unless we actually control every investment someone makes, we are not providing destitution insurance anyway.From today’s USA Today: “Don’t delay reform”
As for transition costs [to private accounts], skeptics should worry more about the price tag of the status quo. If we do nothing, Social Security will owe $27 trillion in promised benefits during the next several generations of retirees. Social Security's trustees say the system will have to cut promised benefits by about 25% in 2042 — and that's just for starters. Talk about risk: Workers now paying into the system will be speeding toward a financial cliff if the system isn't fixed.Star Parker gets right to the point in “End Social Security” (Hat tip to Bad Hair Blog)
In my view, there is only one honest approach to Social Security: fulfill obligations to pay benefits to those who have already paid in and allow the rest of us as quick and expeditious an exit out as possible. Then shut the doors forever.The payroll tax rate has been raised 40 times from 2% of income to 12.4% today. Yet all the alternate plans to private savings accounts (and, admittedly, the $2 trillion in borrowing required for transition) involve raising the payroll tax just a little bit more. At some point, Americans need to say: “enough” – no matter how “successful” the program.
If this seems radical, I'll ask one question. If Social Security did not exist, and we attempted to enact today a system like we currently have, would it pass? The answer is unquestionably no. There is no way that any working American would agree to turn over to the government 12.4 percent of his or her paycheck in exchange for a benefit that has no guarantee, on which ownership has been relinquished and that is less than what could be obtained by buying risk-free government bonds. No way. Zero chance.