It's Time To Privatize Social Security
By Edward Daley (01/13/05)
One of the most important political issues that will be debated this year is how to prevent the inevitable insolvency of our Social Security system. Although it is difficult to know which "experts" to believe when it comes to applying a date to the event, the majority of credible sources I've managed to find expect the system to begin paying out more money annually than it takes in within the next 20 years, if things continue unchanged.
Dorcas R. Hardy believes that Social Security will become insolvent by as early as 2018, and if this former S. S. Commissioner is even close to being accurate in his assessment, by the time I retire (I'm nearly 42) this country will be facing a fiscal crisis so profound that our current $7.6 trillion national debt will seem like a minor monetary nuisance by comparison.
President Bush understands this basic truth, and has, consequently, decided to tackle the problem head-on, instead of simply paying lip service to it and "kicking the can down the road" to the next administration, like his predecessor did. The Bush plan involves allowing individuals (primarily Generation Xers) to place a portion of the money they would otherwise pay to Social Security into individual retirement accounts on a voluntary basis.
http://www.whitehouse.gov/infocus/social-security
While the transition to this sort of partially privatized system may prove to be troublesome initially, the potential difficulties involved do not compare to the enormous problems we'll face if we do nothing but attempt to prop up the same old, outdated system. Continuing down the path upon which we find ourselves today can only lead to increased taxation, decreased retirement benefits or both, and few serious students of the problem have concluded otherwise.
In fact, a substantial majority of reputable economists like Martin Feldstein of Harvard University and Karl Borden of the University of Nebraska agree that some form of privatization is called for if we are to avoid an economic catastrophe in the future. Federal Reserve Chairman Alan Greenspan has spoken about the obvious advantages of such a scheme, among others, and even Edward Prescott, the winner of the 2004 Nobel Prize in Economics supports the idea of individual retirement accounts.
http://www.nber.org/feldstein/aeajan8.pdf
http://www.cato.org/pubs/ssps/ssp1.html
http://www.socialsecurity.org/sstw/sstw11-19-04.pdf
Furthermore, Zogby International has consistently found that roughly two thirds of the American people support the idea of private accounts, and have for many years. As far back as 1992, polls taken by various independent organizations showed that over 80 percent of Americans under the age of 35 favored the partial privatization of Social Security. Since they are the ones who will have to deal with the initial consequences of the government's failure to reform the system, their opinions regarding how we handle the situation should matter the most to our elected representatives.
http://www.cato.org/pubs/ssps/ssp29.pdf
Of course, most Democrats are against the idea of personal retirement accounts, especially now that Republican legislators are seriously considering actually moving the system in that direction, instead of just talking about it. One liberal, who's name escapes me at the moment, but who's thoughts on the matter I had the misfortune of reading in the form of an op-ed just the other day, argued that Social Security really isn't in any trouble at all. He opined that, contrary to what most people believe, the trillions of dollars in combined Social Security surpluses that have been spent on everything BUT retirement benefits in recent decades, weren't really misappropriated. It was his contention that the government has merely "borrowed" the money, and will pay it back in time.
What he failed to take into account is the fact that the government HAS NO MONEY! The government does not create wealth, it acquires wealth through taxation, and if the people running our government intend to pay back into the Social Security system even a fraction of what they and their predecessors have taken out of it, they must first get the money from the people who earn it... taxpayers. Those taxpayers just happen to be the same folks who are owed those Social Security benefits in the first place!
Sure, the government could keep the old Social Security system going for a good long time, and ensure that everyone gets what they've been promised, but to do so it will have to raise taxes more and more every year. Still, eventually even that scheme is bound to fail, simply because the number of younger people paying into the system will keep declining in proportion to the number of older people collecting benefits. One reason is that the birth rate keeps going down in this country. In fact, it's about two thirds of the rate that it was 50 years ago, and there's no reason to believe it will suddenly increase in the near future.
Secondly, the life expectancy of the average U.S. citizen has risen from 63 years of age when Social Security was first introduced, to 75 years today. Not only is there a larger percentage of elderly Americans than ever before, but they're collecting a lot more benefits than they used to, and the way medical science is progressing, that trend is unlikely to reverse itself. What used to be a ratio of 16 workers to every retired person, is now a ratio of 3 to 1. It won't be long before it's 2 to 1, and then what do we do, give a third of everything we earn to the Social Security system?
That doesn't sound like a very equitable plan to me, and I doubt that anyone who's really thought about the problem would disagree. No matter how politicians arrange the numbers, the fact remains that there's a finite amount of money going into the system at any given time, and a finite amount coming out. All the money involved is created by the American taxpayer, and it's the taxpayer who should retain control over it whenever possible. The best way to achieve that goal is to prevent the government from taking so much of it to begin with, and return to the ideals of personal responsibility and individual liberty upon which this country was built.
You can bet your bottom dollar that there'll be a lot of opposition to the President's plan (and any other sensible plan that comes along) in the coming months, from every babbling liberal in both Congress and the "mainstream" press. But then, if they had any common sense at all, they wouldn't be liberals in the first place.
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