Responding to a left-leaning economist on Social Security Reform
Thanks to KipEsquire for leading me to the following article:
PGL at the Angry Bear has written a fairly non-sensical piece about the economics of Social Security which represents about the best the left has to offer. You can take a look at it here, and this is my response:
PGL, in my opinion you are far more misleading than Cato has ever been, and KipEsquire is right on target.
Going through your arguments:
Yes, #9, #10 and #17 document demographics, and demographics are the core of the problem. Downplaying those issues is like saying you have a headache because you have a brain tumor, but I'm going to ignore the tumor and just give you some tylenol. Simply saying "it's just demographics" show the intellectual corruptness of your position.
#12 and #13 represent perfectly reasonable fears by young people. Again, simply calling them "foolish" without any factual rebutting of their fears just makes you look foolish. On the other hand, I understand why you do it...because there are no rational economic arguments for your position.
#6 is an exactly accurate representation of the Nestor decision. By the way, it's not the only Supreme Court decision which says that Social Security taxes are neither investment nor insurance, and convey no property right of any sort to the payer.
As far as #8, you can not generalize that real benefits rise as well. For most people they don't.
The reason it is not surprising that contributions have increased is that government programs always increase in real terms because there is no spending discipline (in either party) and they use that money to cover their wasteful behavior in the rest of the budget.
#1 is not a lie. To the extent that there is "interest income on the Trust Fund" it simply comes from the government moving money from one pocket to the other. The "trust fund" doesn't actually exist. All collected surpluses have been spent. So there is nothing to collect interest on. There are IOUs which say they earn interest, so when the program starts running a deficit the government will increase its ordinary borrowing to pay that "interest".
Being satisfied with 2% return, saying it's OK because it's what your gov't bonds get is outrageous. Why should we be saddled with such a pathetic return when there are other investments out there which can be the difference between being poor in retirement and being OK?
All of your economic arguments for leaving social security alone are wrong and you also miss the real political points, which should be important to liberals:
Social Security keeps poor people poor. It's largely a transfer from black men to white women. It keeps poor people from accumulating savings which could be used to help their families if they die young.
I have written an article about this issue which you can read on my web site. In fact, even though the AARP is on your side and not mine, they have linked to my article:
Also, Social Security is a blanket used by the government to hide its waste and abuse. The only reason our deficit is not even higher is because they cover a big chunk of it with the current payroll tax surplus. However beginning right about now, the surplus will be declining each year, unmasking more and more of the deficit. It will be interesting to see how the politicians deal with it.
Here's my article on that one:
Social Security is on its way to financial failure...or it would be if the government weren't willing to suck our blood to feed it. But even that misses part of the point: If Social Security were solvent it would still be an inappropriate function of government. And even if you thought forcing someone to save were a proper role of government, it's impossible and undesireable for the government itself to be the savings vehicle.
The only reason liberals support Social Security is that they are scared to death of anything that might make the size of government and its influence on our lives decline.
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