Brad Warbiany (http://warbs.blogspot.com) and I are having an ongoing dialog which I think is worth putting up in a new posting partly because it shows how even nominally conservative/libertarian people are having a tough time understanding the personal retirement account issue. It demonstrates what a bad job the administration is doing selling this idea...but I think they're about to get fully in gear.

OK, one issue at a time.

1) If Social Security "keeps Seniors out of poverty" that in no way means that changing the program puts people into poverty. In fact I believe that personal accounts not only would keep more people out of poverty directly, but it also gives the best chance of the next generation to avoid poverty. This is because personal accounts can be bequeathed in a will whereas death means that the government keeps someone's social security benefits.

2) There is simply no way the government will massively interfere with who is approved and who is not. Can you imagine how fast there would be lawsuits against the government if they blocked someone who was clearly qualified. Furthermore, this issue is massively misunderstood: brokerage houses are NOT excited about having lots and lots of small accounts which generate lots of paperwork but almost no revenue. And just because the government says you can't invest in a particular fund does not mean the money is being funnelled through the government. The government says you can't buy cocaine. Does that mean that your purchase of aspirin was funnelled through the government?

3) Means testing simply makes this a welfare program and does not deal with its inherent inefficiency and discriminatory nature (against women and minorities). If you want a welfare program then create one, but that is not what Social Security is supposed to be and we should not encourage the continued growth of government by such suggestions. Private accounts are not "fraught with peril"....the peril is irrational fear of private accounts which everyone who can afford already has, and which members of the House and Senate who do have a choice almost always choose instead of Social Security.

Here are Brad's comments that I'm responding to:

First, the cost savings of means-testing. On my site I pointed to an AARP link that says Social Security keeps ~48% of Seniors out of poverty. I'm sure they inflate their numbers, but that's a savings of half the cost. The program is now a very very expensive wealth transfer to the elderly. I don't like it, but making it a welfare program is better than what we have now.

Second, your investment funds *will* be funneled through the government. Do you think the government is going to let you use that 4% for day-trading? Do you think they'll let you invest it with your buddy Bob, the private investment advisor? Nope. Not going to happen. They're going to allow you to put it into *their* approved funds from *their* approved brokers. Yes, it will be held by private investment houses, but to call it freedom from being funneled through government is inaccurate.

I agree with your point that not having private accounts works to keep poor people poor. And that sucks. But we need to be realistic. The government is going to set up a program that does everything we want it to avoid, and only provides a marginal benefit. They've been doing it for 100 years. Any good idea Bush has for how it should get run will be sucked right out when it goes to Congress and "compromise" happens. I see the private account option so fraught with perils that I'd rather pay welfare to poor old people than trust that the government is going to do this right.

I do see this as a very interesting debate, which has profound implications on the future of this country. I recently moved away from the idea of personal accounts, for all the reasons above. But I do implore you to keep trying to convince me. The only way I can figure out if I'm right or wrong is through debate.