Who Can Really Say?

What About Me?

One of the things I haven't blogged about (an easy thing to do when you're not blogging) is the whole Social Security reform thing. I'm ambivalent about the private/personal accounts being pushed by Bush. On the one hand, I don't see them as a solution to the problem at hand -- they are instead a solution to a much longer term problem. The problem at hand is that in some 13 or so years, Social Security is going to begin putting a big crunch on the Federal budget because annual outlays will begin to exceed annual revenues. More about that in a bit. On the other hand, it would be a good thing if the present system was based upon private accounts, so trying to find some way to do that in the abstract is not a bad idea -- it's just that the details that suck.

Back to the problem at hand. A touchstone of some Democrats' opposition to Bush's plan is that there is plenty of money in the "trust fund". I wish I had an obvious example at hand, but click here and you'll see links 'a plenty to Bush's opponents on the point. We can bandy about words -- is it a crisis or only a problem? Does it need a major overhaul or a tweak? But the bottom line can be found here. It's a brief but accurate history of Social Security, of how it works and how we got to where we are. And where we are, by the way, stinks. But there's nothing new to this. Anyone could have run the numbers 10 years ago and reached the same conclusion.

We need to remember that there are millions of people receiving Social Security benefits today who will be dead in 2018, which means that unless they live in Chicago, they won't get to vote. They will be replaced in the electorate by millions of people who today are solving 2+2=4 math problems, and their brothers and sisters, all of whom did not "promise" me (as an example only) anything.

So we are all screwed, maybe. The one saving grace in all of this is that while these future projections have a more solid foundation than, for example, the projections of increased global temperature over the next 100 years, they are still only future projections. They will undoubtedly change due to circumstances we can't forsee at the moment, and indeed possibly they'll change for the worse.

I don't understand Bush's approach to the problem -- that is -- I don't understand how it helps anyone except the folks still working on their elementary arithmetic and even then, it seems to make the shorter term (20-40 years out) problem even worse. Will Collier at Vodkapundit has the most honest explanation for Bush's proposal, although it doesn't personally make me feel much better about it.

The time is going to come--and we can argue about when this will be, but it is going to happen one day--when we can't keep the old promises any more without either cutting benefits, or having a huge tax increase, or realistically, doing both. That's a pretty rotten thing to do to people who're paying money out of their paychecks every day to support the current system, and reasonably enough think they ought to get a decent return on their money.

What private accounts can do, but the pay-as-you-go system can't, is grow the pot of money available for people to retire on. The government can't grow money, all we can do is tax or borrow, but the market can. With a private account that'll grow for the next 35 years, a 30-year-old will have a cushion against the benefit cuts that will have to happen at some point in their lives--not tomorrow, not next year, but someday--to keep the government from going broke and their taxes from growing to Swedenesque levels.

So what Bush is really doing is trying to create a system that will work AFTER I've died in poverty. Well, I'm a forward thinker and I generally like the idea of that, but all politics is local and it doesn't get any more local than me. What about me?

Posted by Peter at March 10, 2005 07:33 PM