Silly idea. Do you know that the savings rate in the USA hovers around 4%? Do you know how glad many seniors are to have social security? Without it many would have nothing. We can’t all be dot.com millionaires.
You say that as though the money they get is a gift to them from the government, rather than merely money that was already theirs to begin with. And why should I feel sorry for someone that has nothing because they chose to save nothing? If I pushed my car off a cliff, would you feel sorry for me if I then complained about how lame it is to have no car?
People don’t have to be dot.com millionaires. A minimum wage-earner can take the same money that they would have put into Social Security and instead invest in in a private 401K plan. And when they retire, they’ll be a lot better off. What’s grim or sad about that?
I have no problem with giving people a choice where their SS money goes as long as:
-
They can’t touch it until they retire or need it for disability. You know most folks can’t or won’t save if they can get their hand on money.
-
You have to make these changes gradually.
-
The funds need to be insured by the Feds in case of fraud or business problems of the financial institutions.
If those seniors had just invested in private accounts instead of Social Security, who would pay for their parents Social Security benefits? You’re comparing the rate of return if you don’t have to pay your parents’ benefits vs. the rate of return if you do.
Today’s social security taxes fund today’s recipients. If you want to go to a privatized system, ok, but a) the efficiency gains will be barely noticable and b) the transition costs will be in the neighborhood of 3 trillion. Someone has to effectively pay for retirement twice.
Yeah, and have you looked at the reproduction rates of the affluent Americans that fund it? Unless, of course, you are planning to fund SS on the backs of Hispanics and other proportionately poorer minorities…
[/quote]
Wait a minute, I thought anyone could get rich in america, regardless of who their parents were? And you know Social Security taxes stop at ~86k of income, right?
You can argue that social security is something the government shouldn’t be doing because its not their responsibility or whatever, but the program isn’t wasteful. SS has a fraction of the overhead of comparable private retirement programs.
Says who? It’s very easy in a vast government program to conceal hidden costs and deadweight losses. Especially if you aren’t looking for them.[/quote]
Can you provide just a little evidence? Every audit that’s ever been run on the program says it has lower overhead than the private sector.
Well, they obviously can, because under a forced investment program like SS, they do. I agree that some people might choose not to save; I just disagree that it’s the government’s place to do anything about it. I view this in the same way that I view seatbelt laws, or laws against suicide, or laws against subscribing to AOL: if a person chooses to do something foolish that hurts only themselves, it’s not the government’s place to intervene. Laws that regulate these sorts of private choices are a can of worms that I’d rather leave closed, or at least not open any further.
- You have to make these changes gradually.
Yes.
- The funds need to be insured by the Feds in case of fraud or business problems of the financial institutions.
Why? Most retirement plans are already insured against fraud and embezzelment. They aren’t insured against losses like bank investments are, but if people want that kind of insurance, they can already put their money in a bank (and even then, they’d earn a larger return than they’d get out of SS).
I guess what you really want is for the government to safeguard all people against all risks–even ones they choose to take willingly. I think that’s silly. More to the point, it’s impossible.
Ben, Social Security is effectively a risk-pooling retirement insurance program; no matter how bad your investments turn out/you get hit by a bus/whatever, you won’t starve in retirement. Something like 10% of outlays go to people who are disabled, too.
That’s a hard world you live in, man! No compassion, no caring, no lending a helping hand… or am I misunderstanding you? (Ben)
You’re getting kind of prone to hyperbole, my man. Maybe tone it down a bit, eh?
Anyone can, but not everyone is at the moment. In any case, as a group becomes more affluent it tends to reproduce less, so I think it is safe to say that it is a trend that will carry on as more fertile groups become better established. Most people don’t make anywhere near 86k, so that’s hardly the issue, now is it?
Can you provide just a little evidence? Every audit that’s ever been run on the program says it has lower overhead than the private sector.
Yeah, I’d love to see the sorts of disinterested auditors you are talking about. Like I said, it is easy to ignore the problems if you aren’t looking for them, or using a relatively vague parameter like overhead to define the debate.
A briefer version of Feldstein’s views (plus I know you’ll love the source)
You’re getting kind of prone to hyperbole, my man. Maybe tone it down a bit, eh?[/quote]
If I understand him correctly that’s what he is saying.
There are many who don’t equate compassion with modern brands of feudal patronage. Moreso if it is not sustainable in the long term, which I believe is where Ben and I have some common ground. Then it becomes a simple case of who is willing to deceive themselves the most; does it really make a man more humane to promise things he can’t deliver?
Either way, to cast any debate in those terms, especially on economic issues, is not conducive to results, simply because it tends to devolve into ad hominems. They are fun, and certainly have their place, but not as a substitute for a concrete argument (in my opinion). That’s what the analogy of Godwin’s law in the other thread was meant to imply.
It’s not like I have all or any of the answers. But the simple solution to budget problems is not “Let’s get rid of Social Security.” Someone could just as easily say “Let’s get rid of western water and pasturage rights.” or “Lets get rid of the postal service and let UPS run it…”
Yeah, it sucks. But it cracks me up that you can simultaneously admit what a scam the whole system is–you can’t even stop it without screwing people over!–and advocating that the best course of action is to keep it going. Someone has to be the last block in the pyramid scheme, and forward their $5 for no return. That’s what makes it a scam, and it’s why pyramid schemes are normally illegal.
You’re comparing the rate of return if you don’t have to pay your parents’ benefits vs. the rate of return if you do.
Yes. Once SS is completely eliminated, however, people won’t be paying their parents’ benefits any more. I agree that the rate of return for people in the transition period will be less.
the efficiency gains will be barely noticable
By “efficiency,” I assume you mean “returns.” If so, you are mistaken.
Can you provide just a little evidence? Every audit that’s ever been run on the program says it has lower overhead than the private sector.
Who cares what the overhead is? What does that have to do with the cost of tea in China? The only worthwhile metric is the rate of return on investment, which is less than two percent and has been falling every year for quite some time now. It’s substantially lower for the poor, by the way, since they typically spend less time in retirement and thus draw fewer payments from SS. I don’t care if the government doesn’t have to spend a lot of money to manage my practically stagnant SS investment. That has no bearing on whether or not the system benefits its recipients.
Someone could say that, but neither of those things are a significant amount of the budget (the Post Office, in fact, is not even on the budget), and neither of those things has such an obvious and better alternative available. The Post Office, for instance, is remarkably efficient, and its service is inexpensive (though that’s largely because they are exempt from paying taxes that competing businesses such as UPS have to pay).
LK, “population-wide demographics might lead in the future to a decreasing population, which could lead to problems with the SS system” isn’t equivalent to “Yeah, and have you looked at the reproduction rates of the affluent Americans that fund it?”
Feldstein’s views on efficiency loss - which I’m not contradicting, I haven’t examined them closely - are not “waste” as normal people define it. When people talk about “wasteful government” they’re not really referring to deadweight loss triangles, they’re talking about pointless things (like the helium reserve) and government featherbedding (tons of bureaucrats that do nothing). If you compare social security to a private retirement program, it has lower accounting overhead. Full stop.
Yeah, it sucks. But it cracks me up that you can simultaneously admit what a scam the whole system is–you can’t even stop it without screwing people over!–and advocating that the best course of action is to keep it going. Someone has to be the last block in the pyramid scheme, and forward their $5 for no return. That’s what makes it a scam, and it’s why pyramid schemes are normally illegal.
It’s not a pyramid scheme. A pyramid scheme collapses when there’s no one else who can get into the system - SS doesn’t have that issue.
Here’s a better summary of what’s wrong with the rate of return comparision argument:
http://www.wws.princeton.edu/~pkrugman/socsec.html
Social Security is a hybrid investment and insurance plan; you’re more or less guarenteed a rate of return equivalent to economic growth, with no risk.
By “efficiency” I meant SS’s long-run effects on productivity growth, as mentioned in the Feldstein paper.
Whatever. As quatoria says, this is just a bunch of hyperbole, unless you think that the money that the government automatically removes from my paycheck each week (whether I want it to or not) somehow equals compassion.
It’s easy to lend a helping hand when most of the money comes out of other people’s pockets. I’m not against charity or compassion. I’m just against government-enforced charity for people that are in bad straights solely by choice. We’re not talking about folks that are penniless through happenstance, here. Did you even read my car example? Would you feel charitable towards me in that situation? Would you buy me a new car to replace the one I pushed off a cliff? What if the government passed a law that said that everyone has to chip in and buy a new car for anyone that pushes their car off a cliff? Sounds silly, doesn’t it?
Ben, your arguments about charity/other peoples pockets apply to Social Security about as much as they do to, say, homeowner’s insurance.
If the ratio of retirees to workers remains constant, or only increases in the retirees’ favor, then that’s true. But that’s not the case. Which is why SS taxes keep going up while the rate of return declines.
SS differs from most pyramid schemes in that it doesn’t promise impossibly high returns, but it does rely on money from later investors to pay earlier investors, which is pretty much the defining trait of a pyramid scheme.
How so?
Well then, I should have been clearer about both points. I don’t think they are the OHMYGOD reversals you seem to portraying them as, but whatever. Do you have a rebuttal or just a critique of my phrasing?
Feldstein’s views on efficiency loss - which I’m not contradicting, I haven’t examined them closely - are not “waste” as normal people define it. When people talk about “wasteful government” they’re not really referring to deadweight loss triangles, they’re talking about pointless things (like the helium reserve) and government featherbedding (tons of bureaucrats that do nothing). If you compare social security to a private retirement program, it has lower accounting overhead. Full stop.
Right. And in rhetoric class you’d learn that’s called a straw man. I specifically said deadweight loss, no?
In any case, I would be very interested in seeing some figures for these accounting savings you cite. I’d be even more interested in how such a level of efficiency can be obtained that it outweighs, say, the ridiculously low rate of return.
It’s not a pyramid scheme. A pyramid scheme collapses when there’s no one else who can get into the system - SS doesn’t have that issue.
Because a pyramid scheme has an unusual level of force to back it up and a guaranteed pool of scamees does not make it any less of a con.
Here’s a better summary of what’s wrong with the rate of return comparision argument:
http://www.wws.princeton.edu/~pkrugman/socsec.html
Social Security is a hybrid investment and insurance plan; you’re more or less guarenteed a rate of return equivalent to economic growth, with no risk.
By “efficiency” I meant SS’s long-run effects on productivity growth, as mentioned in the Feldstein paper.
Well, there in a nutshell is the sort of reasoning that is the formal cause of my lack of respect for Krugman’s views.
Ben summed it up nicely above: To defend social security on the basis of the costs incurred incurred in getting rid of it, created by the very corruption that makes it bad in the first place, is madness. That means one should come up with creative, long-term means of paying for the transition as soon as possible, but it is no argument for continuing to prolong the agony and further swell the costs. The longer you wait, the worse it’s going to be, and the closer we come to that moment when there are far more people retiring than paying into the system. The Baby Boomer generation expedited matters, but it is a problem that is bound to happen. Ask Europe.
Right. Social security, a public program with polling in the 70% range - is actually a con enforced on people against their will!
I’m not defending social security because of the costs it’ll take to transition to a private system; if you want to pay them, go right ahead. But pretending those costs don’t exist, and then pretending that you can get a higher rate of return in a private system based on that, is dishonest.
And what “corruption” are you talking about?