Samuelson on Social Security
In the Washington Post today, Robert Samuelson provides more information and perspective on the Administration's Social Security plans. Samples:
You've probably never heard of Flemming v. Nestor, but it's a 1960 Supreme Court decision that demolishes the Bush administration's case for borrowing vast amounts to pay for its proposed "personal" Social Security accounts. The White House has crafted a clever bit of intellectual camouflage to do what's politically convenient: create a new government benefit at no obvious cost. True, borrowing is a cost, but it's largely hidden from the public. It's not as conspicuous as a tax. What we have here is an exercise in mass deception that, in a weird way, is encouraged by a public that prefers to be deceived rather than face the difficult choices posed by Social Security or the government's budget.
If personal accounts are worth having (they're not), then they're worth paying for through taxes or cuts in other government spending. Perish the thought. ...
Americans dislike deficits but dislike them less than the alternatives -- higher taxes or lower spending. There's a quiet clamor for hypocrisy and deception, and pragmatic politicians respond with massive borrowing schemes that seem to promise something for nothing. Please, spare us the truth.
It's becoming more and more obvious that the Bush Administration's plans for Social Security are ill-conceived and unsound. We can only hope that Congress won't be deceived by all the smoke and mirrors.
You've probably never heard of Flemming v. Nestor, but it's a 1960 Supreme Court decision that demolishes the Bush administration's case for borrowing vast amounts to pay for its proposed "personal" Social Security accounts. The White House has crafted a clever bit of intellectual camouflage to do what's politically convenient: create a new government benefit at no obvious cost. True, borrowing is a cost, but it's largely hidden from the public. It's not as conspicuous as a tax. What we have here is an exercise in mass deception that, in a weird way, is encouraged by a public that prefers to be deceived rather than face the difficult choices posed by Social Security or the government's budget.
If personal accounts are worth having (they're not), then they're worth paying for through taxes or cuts in other government spending. Perish the thought. ...
Americans dislike deficits but dislike them less than the alternatives -- higher taxes or lower spending. There's a quiet clamor for hypocrisy and deception, and pragmatic politicians respond with massive borrowing schemes that seem to promise something for nothing. Please, spare us the truth.
It's becoming more and more obvious that the Bush Administration's plans for Social Security are ill-conceived and unsound. We can only hope that Congress won't be deceived by all the smoke and mirrors.
6 Comments:
Well Tom, since you seem intent on only reading what you want, or at least blogging selectively, I'll point you to the blog of two of the most prominent economists in America today:
http://www.becker-posner-blog.com/archives/2005/02/social_security.html
http://www.becker-posner-blog.com/archives/2005/02/why_i_support_a.html
http://www.becker-posner-blog.com/archives/2005/02/response_to_com_4.html
http://www.becker-posner-blog.com/archives/2005/02/social_security_1.html
Scott, thanks for the references to Becker-Posner. I respect them, and I've had a link to them in my blogroll for quite a while.
Nothing in those posts changes my mind about the fundamental problems evident in the Administration's proposals. Granted, there may be some better approach that combines private accounts and action necessary to ensure future solvency of the SS system. Some of what Becker and Posner say supports that. But in regard to the Administration's approach, I can't get past the huge unfunded transition cost and the failure to address hard choices necessary to ensure future solvency.
As I've indicated in previous posts, not being an economist makes it hard to understand the vast array of differing arguments on this subject. On the other hand, I'm not sure being an economist would help much because they can't seem to agree on a lot even among themselves.
Do I blog selectively? I guess I do, but then don't we all? Believe me, when I find the Eureka! source that solves all my concerns on Social Security, I'll be sure to post it...several times!
Tom - Yes, my ideal differs from both the administration's and the Democrats'. I favor privatization of a certain type coupled with raising the retirement age to 69 or 70. In addition, raising the payroll cap about 50-75% beginning in 2018 (when outflows begin to exceed inflows) would be another important piece of the puzzle.
As far as not being an economist, I've often thought the most important set of specialized knowledge any American citizen could have today would be on economics. I have a bias of course since I have a degree in economics, but the fact there are many schools of thought in economics is important to the complexity of each financial debate.
Reguardless of what happens, it's going to be like having surgery. The cure is going to be painful. You know the old saying, "The surgery was a sucess, but the patient died."
I too would agree with Junebug - the cure may be painful, but without it, the patient will basically die.
Beyond the pyramid scheme that SS presently is, what with few folks on the bottom of that pyramid. There is also the issue that SS typically pays 0.5% to 1.0% on what is put away. Some of the most conservative funds return (over a 20 year period) of 5.0%
SS HAS to be reformed.
Scott, sounds like you're talking about a combination of solutions that might work. I'm not against that in principle; I just think what's going on now is ill-conceived.
Junebugg and Michael, most experts seem to agree that the system needs work to keep it sound over time. Just seems like it's too hard and confusing to reach consensus on one solution.
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