The truth emerges: or at least part of it. Thank you, Mr. Wehner.
The Social Insecurity plan (I’m pleased to be told by readers that the name is catching on) was never about private accounts. It was about reducing the incomes of future retirees, who in the BushCo moral universe have no legitimate claim to share in the economic growth that takes place after they retire. Thus the plan to wreck the proudest accomplishment of the New Deal is “a moral goal and a moral good,” and the right wing should be glad that “for the first time in six decades, the Social Security battle is one we can win — and in doing so, we can help transform the political and philosophical landscape of the country.”
Here’s the key sentence:
No one on this planet can tell you why a 25-year-old person today is entitled to a 40 percent increase in Social Security benefits (in real terms) compared to what a person retiring today receives.
I suppose I must have moved off-planet without noticing it, but the justification for wage indexing seems pretty clear to me. Either benefits go up with wages, or the increasingly long-lived retiree population will become relatively poorer as it ages.
After all, unless Bushite Peronism really manages to wreck the economy long-term, a child born to the average household in 2050 will be substantially richer than a child born to the average household today, without having done a lick of work to earn it. Is that somehow morally shocking? Then why does it violate some law of nature for older people to get richer along with the rest of us?
There’s a case for worrying that rising OASDI tax rates will become a significant work disincentive, especially if benefit levels are only weakly correlated with taxes paid.
And there’s a case for worrying that the existence of Social Security as a relatively generous indexed annunity may be contributing to low household savings rates, and thus both to low national savings rates and to the scandalous maldistribution of wealth that has the typical American dying with not much more than he needs to bury him.
(For a description of these problems and a sketch of possible solutions from someone who wants to fix the program rather than wrecking it, see James Tobin’s Cowles Commission discussion paper from 1987.)
Now I’m more worried about work disincentives at the bottom of the income distribution, where the current Social Security system acts as an implicit subsidy, than at the top, and I’m far from convinced that private accounts are necessary, or even the best way, to deal with the problems of undersaving and inadequate wealth accumulation.
Still, I acknolwedge that the incentive effects of Social Security are worth worrying about, and that a properly-designed private account scheme might be able to fix them.
A properly-designed system, as my friend David Boyum points out, would have private accounts but not free choice of investment vehicles, and it would be progressive: the annual contribution to the private account would be a fixed sum, not a fixed percentage of earnings. And the payout from those accounts would be in the form of indexed annuities, with individuals having the option to reinvest a portion of what would otherwise be the payout in any given year but not to draw the account down faster than the annuity rate.
And, of course, the transition would be financed with some combination of taxation and spending cuts, not by floating another couple of trillion dollars’ worth of bonds; otherwise the change does nothing for the national-savings problem.
But then Boyum asks the hard question: given that there exists a private-account system superior to the current system, should Democrats say that they’re for it instead of rejecting private accounts altogether? If we had a rhetorically masterful leadership cadre, effective control of the communications channels, and a set of opponents constrained by intellectual honesty, or at least ordinary honesty, in their debating approach, there might be a good case for proposing a serious alternative.
In the actual situation, however, where none of those three conditions holds, I’d say that the duty of the opposition is to oppose. (Some Democrats are hedging by simply listing a set of criteria for the sort of “reform” they will endorse, making sure that no Bush plan will meet those criteria. That’s not a bad idea, as long as it doesn’t elide a question of principle into a question of detail.)
Now that Mr. Wehner has spilled the beans, opposition ought to be relatively easy. It’s not often, after all, that an idea this bad is also potentially this unpopular.
Update: Brad DeLong outlines the problem and the solutions.
One thought on “The mask comes off the Social Insecurity plan”
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