Logic Times

Do As I Say, Not As I Do

Posted by Aslan, 03/13/05, 1:31pm. Comments (2)

Social Security should be eliminated. The federal government has no business managing a compulsory national retirement plan (and no constitutional authority to do so).

The standard objection to this libertarian position is that, without this social safety net, the streets would eventually become flooded with countless shortsighted retirees, impoverished by irresponsible management of past income. Many, perhaps a majority, would simply spend that 7.5%, totally oblivious to a future of homelessness squatting beneath a highway overpass eating canned cat food.

The government protects people from themselves, from the appalling lack of fiscal discipline that is simply human nature. Without Social Security, we would desperately need responsible savings habits. This we won’t see. What we are likely to see is:

Money that should be earmarked for retirement will be spent on things that interest people now. Without government compulsion, people will spend money on what they want today, not discipline themselves to benefit tomorrow.

When some money is occasionally set aside for retirement, it will be routinely raided for current needs. And the definition of a "current need" is flexible, is it not? A new car. A new HDTV.

Admittedly some Americans are savvy investors, but most of the great unwashed – Wal-Mart shoppers and NASCAR fans – would be clueless money managers. It is likely that these primitive investors would be unable to generate even as little as two percent return on their money, resulting in a vastly underfunded retirement.

This is why the government needs to shield the people from their own lack of discipline. Look how Social Security manages the dangers described above:

The government has the discipline to save for tomorrow and not spend money on the demands of today. {Truth: the government only spends and never saves.}

The government never raids money set aside for retirement. {Truth: the government has raided 100% of money earmarked for retirement.}

The government will be able to maximize return on investment. At the very least, the government can guarantee you a rate of return equivalent to index funds. {Truth: Social Security’s adjusted average rate of return is an appalling 1.23% (data here).}

So, to avoid potentially bad management and weak fiscal discipline of the people, we have unconstitutionally seized income and turned it over to the worse management and weaker fiscal discipline of the government. Great plan, liberals.

Are you not reminded of that mother who, with clouds of smoke hanging over the kitchen table and a cigarette in hand, yells at her children to never smoke? If challenged, she says, "Do as I say, not as I do!"

Comments

1: William

April 3, 2005 6:11am EST

I am amazed as to the ignorance of many organizations and liberal groups as to the serious problems that exist with Social Security and the fact it is on a disastrous course.

Even the groups that recognize there is a problem offer no solution other than that it needs to be strengthened. Then you have huge lobbies like the AARP attacking the President's attempt to address it at every turn.

Here is how they educate its 35 million members on their website:

Q. I hear a lot of officials accusing one another of wanting to “privatize” Social Security. What are they talking about?

A. “Privatization” is often used as shorthand for the idea of taking some of the money workers currently pay into the Social Security system and diverting it into individually owned accounts, where each worker would bear some risk for how his or her investments performed. These accounts would be "carved-out" of Social Security.

Diverting money away from Social Security and into individual accounts is risky and involves trading some of today's inflation protected, lifetime guaranteed benefit for an account subject to market risk and not guaranteed to last a lifetime or keep pace with inflation. Inflation, market turns or loss of employment can mean that your private account may not have enough money to provide an adequate benefit.

Unfortunately, there is a lot of debate on the semantics rather than the substance. Essentially it doesn't matter if you call the concept "privatization," "personalization," or anything else—diverting Social Security revenues into individual accounts shifts risk to the individual and hurts the financial status of Social Security itself.

Q. How exactly do "carve-out" accounts hurt Social Security's finances?

A. Diverting money out of Social Security into individual accounts worsens Social Security's long-term financial health. Since current payroll taxes are used to pay benefits to beneficiaries, transferring money into individual accounts means that less money will be available to pay promised benefits. To avoid major benefit cuts, younger workers would have to pay twice—once to fund the new account and again to meet Social Security's current obligations.

Q. But isn't Social Security in financial trouble anyway?

A. Not for a long time. Social Security is projected to have enough assets to pay 100% of benefits until 2041. Even then, incoming revenues will be enough to pay more than 70% of benefits for decades to come. This isn't enough— we need to strengthen the system so that it remains strong for our children and grandchildren. And doing this will involve some hard choices. After all, there is no such thing as a "free lunch."

See nothing to worry about!

{Aslan: I bet it is amazing watching lemmings go over a cliff. This should be the AAOL - American Association of Old Lemmings. "Diverting money out of Social Security into individual accounts worsens Social Security's long-term financial health." Arrrgh.}

2: L. Clayton Cate

April 7, 2005 11:05am EST

When God asked Cain where his brother was, his answer was: "Am I my brother’s keeper?" It was his way of saying, where my brother is, and what may have happened to him, should be no concern of mine. God seems not to agree with that principal. He seems to believe that you have no other purpose for existing on this earth than to be a helper to your brother. You seem to be saying the same thing that Cain said only you use a lot more verbiage to get it out. I think you should continue to refine that argument in the most precise and logical way you can. Someday, it might really be important.

Further, there are many people in our society who worked hard all the days of their life for little in the way of reward. My parents were in that number, and so are many of the retired folks who are my neighbors. Without Social Security, almost all of them, when they got too old to work, would have fallen into the worst kind of poverty. But somewhere back there, we made a deal with them, a social contract, if you will. We told them, work hard, and do your bit to keep the country running, and when you are old, and

can't work, we will see to it that you won't starve.

Some might say that is not the job of the government to do that. I just can't think of a better purpose to have a government than that.

{Aslan: You assume that my criticism of an inefficient government program equates with a lack of compassion for my fellow Man. That is quite a leap.

Human behavior does not happen in vacuum. It is the assumption of pro-government social engineers that measures taken to address a problem do not alter human behavior. This is untrue. The failing of the Great Society – a high-minded program with noble intentions – is a testament to how solutions that reward wrong behavior make things worse, not better. Your Judeo-Christian desire for a safety net under all Americans – attempted with the Social Security program – exacerbates the problem. Why? Because behavior is altered. The imperative that citizens save for their retirement is no longer an imperative – Social Security is there. Behavior changes…some of those who would have saved a little, now save nothing. Some who would have saved more, now save just a little; it becomes easier to rationalize satisfying current economic desires because a safety net is there.

My comments do not reject the idea of a compassionate society, but suggest that, unlike your belief, I can’t think of a worse purpose for a government that that. Not only does it grow the problem, but those it purports to help here and now are given a pittance, when it could have been real wealth.

Clay, the role of compassion falls to the individual, not the government. The need for safety net can be managed through the private, compassionate work of individual Americans – even Judeo-Christian ones, believe it or not!}