February 24, 2005
More Social Insecurity
Mark Alexander: What Social Security crisis?:
"The PRA plan would "cost" about $664 billion in "lost" SSI revenue over the next ten years. Of course, this lost SSI revenue is merely revenue that's been moved to PRAs, and thus isn't available to "borrow" from the SSI trust fund for other entitlement programs -- and that's why the Demos are hopping mad."
In response to Honest Partisan, who said the following in a comment left below (what's up Jack!):
"Walter Williams is right that Congress can constitutionally cut benefits or raise taxes, because Social Security is statutory. That will remain the case whether we keep the current system or whether Bush's privatization plan passes. There's a policy that Congress today is not allowed to tie Congress' hands in the future."
Jack, I don't believe this to be the case. Read the quote above. PRAs mean that excess revenue will no longer be transferred from the SSA to the Treasury. The PRAs will function largely like IRAs, the deposits being controlled (and owned!) by the individual citizen and not the government. You also should know that Congressmen (and all federal employees) already have what's known as Thrift Savings Plans, which function more or less identically as the proposed PRAs would.
The key point to understand IMO is that Social Security as currently structured is broken as designed. That we are talking about 2018 and 2042 and tweaking certain payout and taxation metrics is simply a conversational diversion to the fact that SS is the legal confiscation of wealth. Should people plan for retirement? Of course! Should the federal government enforce such a mechanism? Insofar as government should be involved at all, it should not be the escrow agent of citizen's money. Congress has clearly demonstrated that it is not up to the challenge (ie, the cookie jar full of IOUs). Changing SS to mean essentially forced savings is a far more palatable option.
Posted by nopundit at February 24, 2005 11:08 AMHey, man, glad to see that you seem to have enjoyed your recent weekend with some of the other statists you know. Just to respond to a couple of things you're saying:
First, there's an argument about how things will work versus whether you think they're just or not. I take your normative comments about "confiscation" and your general libertarian orientation to mean that even if Social Security works, i.e. has reduced poverty among the elderly, that it constitutes a statist action that you would oppose for other principled reasons. Do I read you correctly?
Second, as to whether it would work or not:
Walter Williams says that the government could conceivably cut benefits and we'd be powerless to do anything about it, in contrast to a private party that, say, we could sue if it didn't deliver on a promise. Private accounts will pay whatever benefits they have accrued over the years, the argument goes, so you won't have a future government cut your benefits.
Of course, as you libertarians are painfully aware, the government in fact can (and does) take private money all the time, through taxes (not enough on the rich for my tastes!) Is it politically unlikely that the government will tax private accounts in the future? I suppose, but benefit cuts will be just as politically unlikely.
While benefit cuts in the future are a matter of some conjecture (my favorite two remedies for any shortfalls that may occur in Social Security are progressively taxing benefits and raising the $90,000 cap), it is a guarantee that some percentage of people who invest in the private market are going to end up worse off than if there was no change. The market goes up and down, and after all, and even well-meaning, intelligent, conscientious people lose money in it.
That's what Social Security is all about -- a baseline of benefits that protects against destitution when someone, perhaps due to no fault of their own, doesn't have anything to retire on (more ideally, Social Security supplements other forms of retirement income, like investments, pensions, 401(k) plans). I don't see how privatization (partial or not) can possibly work without diluting that basic guarantee against destitution in retirement. "Confiscation" or no, it seems just to me.
Posted by: honestpartisan at February 24, 2005 05:42 PM