I have only begun to plumb the depths of Cato’s resources on Social Security. In the process, I ran across this excellent paper, “The Moral Case for Social Security Privatization,” by Daniel Shapiro. It turns out that Danny made most of the arguments I’ve been trying to formulate back in 1998. It’s time for this paper to get the attention it deserves.
Here’s a taste:
The most important arguments for Social Security privatization are moral, not economic. Privatization would not be justifiable if it were economically beneficial but morally suspect.
However, a privatized Social Security system meets moral criteria far better than does our current, bankrupt, pay-as-you-go system. A privatized Social Security system gives individuals more freedom to run their lives, is fairer, provides more security, and creates less antagonism between generations, fostering a greater sense of community.
In fact, privatization is defensible not only from the classical 1iberal or libertarian perspective, based on maximizing individual choice and liberty, but from virtually every perspective in political philosophy. Egalitarians, who frame their arguments in terms of fairness, welfare theorists who frame their arguments in terms of economic security, communitarians who frame their arguments in terms of community, and anyone who frames an argument in terms of whether average citizens understand the institutions or programs which they are asked to support, should all support privatization.
Bring it around third and head for home: Only one group can possibly support the current system — those who think that the overwhelming majority of people are incompetent, hedonistic dullards who cannot think beyond their next paycheck.
I haven’t looked at the paper, but I’m skeptical that it can offer an egalitarian justification for privatization. The present system is about as egalitarian as such a program possibly could be. I think you’re going to have to supplement or abandon the egalitarian perspective if you want to defend privatization.
I’m also fascinated by the unusual typo in the excerpt: “classical 1iberal.” You’d have to be pretty unfamiliar with the layout of a keyboard to mistakenly substitute a 1 (one) for an l (el)!
I disagree Kip. Only a philosophy major would think morals have anything to do with the plan to privitize Social Security accounts. And only a philosophy major would think that a persuasive moral argument will change the minds of more that a small percentage of the people who oppose this current push to create private SS accounts.
Some of us oppose private Social Security accounts because the current plans won’t result in truly private accounts, just a different kind of government program.
Some of us oppose it because we fear the transaction costs are too high. The money needed to create private plans has to be borrowed, and our defecit is already $500 billion a year.
Some of us oppose it because we know that even if people piss away their private accounts, the government will still have to support them in their old age.
Some of us oppose it because there are government programs that will lead to far bigger defecits in the future, like Medicare, that should be looked at first.
Some of us oopose it because it will open up trillions of dollars to theft from corrupt government officials and financial institutions.
Address these reasons why people oppose the plan to privitize SS and you will win over far more people than the 5 or 6 people who oppose it on moral grounds.
david:
if it was cut and pasted from a pdf document, that sometimes happens. numbers get substituted, letters get lost, etc.
Many people oppose reform for the reason Kip mentions.
Some others oppose it because they are extremely risk-averse and suspect that any change will make things worse.
Some others oppose it because it falls short of libertopian perfection.
And there are others who like Social Security and Medicare the way they are because they are programs that help some to gain and maintain power by making people permanently dependent on government programs and politicians’ support.
And, of course, many oppose it for some combination of these reasons.
All of these reasons are bad.
That’s fine. And who is going to reimburse me for paying for having to be required to pay for the education of children who are not our’s–tye children who might be expected to pay SS for us?
If you want to know why nobody really believes you so-called “libertarians,” it’s in part because you have no answer for questions like that.
Gil, I have never met an actual human being who opposes Bush’s privatization scheme for any of those reasons. I fear your opponents exist only in your fevered imagination.
Realish,
You may be right. What is/are your reason(s)?
Raj,
Libertarians do have an answer to questions like that.
We’d like to get rid of all of these involuntary transfers; not heap them on top of each other hoping for some kind of balance.
I like the idea of the private account system, however if you want to win the hearts and minds of the public over to this idea, the practical questions such as those that monkeyboy raises have to be addressed. I saw a debate on CNBC in Dec. between someone from Cato (not Will) and the spokesperson for the AARP. The AARP completely trounced the Cato rep in the debate because she was focused on this idea of an ownership society, which I agree with in theory, but was completely unable to answer the practical questions such as “where is the money going to come from to support the current retirees if we implement private accounts?” America is much more interested in where Grandma’s next check is going to come from so she can have food and heat rather than the moral reasons for changing the system that provides her main source of income. While the arguments about one system being more or less moral than the other are very interesting, they won’t do much to sway public opinion, which is what will drive the politicians voting on the proposal.
The previous anonymous comment illustrates one dishonest leftist tactic in the SS debate– the notion that SS, as currently conceived, is all about making sure that “Grandma… can have food and heat”. In fact, making sure that elderly people have food and heat could be accomplished with a much less generous, more narrowly focused program than SS.
The recent NYT magazine article on the topic, written by an obvious left-wing opponent of SS reform, inadvertently makes this point while trying to make the opposite one. He says that if SS were abolished tomorrow, 48 percent of the elderly would be in poverty. But this means that slightly over half of SS recipients do not need SS payments to keep them out of poverty. And since people who earn more get higher SS benefits, that means that probably significantly *more* than half of all SS dollars now go to recipients who do not need that money to keep them from being poor!
Now the standard leftist response to this seems to be essentially, “yeah, but if we didn’t make middle-class elderly people into welfare dependents, the program wouldn’t be so popular, and eventually the now-unbribed middle class would vote to cut off even the poor elderly.” The problems with this argument are:
1. welfare programs for poor people have not in fact gone away in America and are not going to, though they were curtailed somewhat by Clinton’s reforms;
2. the people who make this argument also claim (see e.g. monkyboy’s third point above) that private accounts won’t work because those who get poor returns will be bailed out anyway, since it will be politically infeasible to just leave them to their fate.
BTW, the NYT article is at:
http://www.nytimes.com/2005/01/16/magazine/16SOCIAL.html?oref=login
And I notice, Nicholas, that you employ the standard looney libertarian straw man tactics of failing to address any of the valid arguments against the privatization of Social Security.
Many of us support the *idea* of private accounts, but worry that the implementation of them will cause more financial problems than they solve.
Until these concerns are addressed, Social Security reform, and more importantly, Medicare reform, will never happen.
Will,
By privatization of Social Security do you mean abolition? Because the moral argument is for abolition, isn’t it?
John, No I don’t mean abolition. There is a moral argument for abolition as well. If you buy that argument, then one argument for PRAs is that abolition is a shorter step from there.
I’m not sure how replacing a wealth transfer programme with a compulsory savings programme counts as a step towards ending programmes.
- Josh
“There is a moral argument for abolition as well.”
Is it moral to force people to save?
monkyboy, you wrongly assume that I support the Bush plan. I actually agree that private accounts as they are likely to be implemented by the Bushies will probably be a net negative for liberty. I’d much rather see a straight benefit cut, but this is probably a political nonstarter.
I’m just pointing out that the “SS is an essential safety net for everyone and cutting guaranteed benefits will leave old people starving in the streets!” bit is demonstrably wrong. What makes me want to tear my hair out every time I see a mainstream-media debate on SS is the obvious, enormous dishonesty on *both* sides.
raj,
And who is going to reimburse me for paying for having to be required to pay for the education of children who are not our’s–tye children who might be expected to pay SS for us?
I’m not sure what you are getting at here, but how are children from Thailand any less “your” children than children from Oklahoma, or Florida, or Nevada, or any other State you don’t currently inhabit? What does it mean to say that the latter children are “our” children while the former children are not?
Micha,
I’m also not certain what Raj was saying, but I took him to be referring to children that weren’t from his immediate family.
I thought that he was suggesting that it’s ok to demand that other people’s children pay for his retirement, because he has to pay for other people’s children’s education.
Will,
How much freedom would you like to see people have in the management of their “private” accounts?
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Bring it around third and head for home: Only one group can possibly support the current system — those who think that the overwhelming majority of people are incompetent, hedonistic dullards who cannot think beyond their next paycheck.
I haven’t looked at the paper, but I’m skeptical that it can offer an egalitarian justification for privatization. The present system is about as egalitarian as such a program possibly could be. I think you’re going to have to supplement or abandon the egalitarian perspective if you want to defend privatization.
I’m also fascinated by the unusual typo in the excerpt: “classical 1iberal.” You’d have to be pretty unfamiliar with the layout of a keyboard to mistakenly substitute a 1 (one) for an l (el)!
I disagree Kip. Only a philosophy major would think morals have anything to do with the plan to privitize Social Security accounts. And only a philosophy major would think that a persuasive moral argument will change the minds of more that a small percentage of the people who oppose this current push to create private SS accounts.
Some of us oppose private Social Security accounts because the current plans won’t result in truly private accounts, just a different kind of government program.
Some of us oppose it because we fear the transaction costs are too high. The money needed to create private plans has to be borrowed, and our defecit is already $500 billion a year.
Some of us oppose it because we know that even if people piss away their private accounts, the government will still have to support them in their old age.
Some of us oppose it because there are government programs that will lead to far bigger defecits in the future, like Medicare, that should be looked at first.
Some of us oopose it because it will open up trillions of dollars to theft from corrupt government officials and financial institutions.
Address these reasons why people oppose the plan to privitize SS and you will win over far more people than the 5 or 6 people who oppose it on moral grounds.
david:
if it was cut and pasted from a pdf document, that sometimes happens. numbers get substituted, letters get lost, etc.
Many people oppose reform for the reason Kip mentions.
Some others oppose it because they are extremely risk-averse and suspect that any change will make things worse.
Some others oppose it because it falls short of libertopian perfection.
And there are others who like Social Security and Medicare the way they are because they are programs that help some to gain and maintain power by making people permanently dependent on government programs and politicians’ support.
And, of course, many oppose it for some combination of these reasons.
All of these reasons are bad.
That’s fine. And who is going to reimburse me for paying for having to be required to pay for the education of children who are not our’s–tye children who might be expected to pay SS for us?
If you want to know why nobody really believes you so-called “libertarians,” it’s in part because you have no answer for questions like that.
Gil, I have never met an actual human being who opposes Bush’s privatization scheme for any of those reasons. I fear your opponents exist only in your fevered imagination.
Realish,
You may be right. What is/are your reason(s)?
Raj,
Libertarians do have an answer to questions like that.
We’d like to get rid of all of these involuntary transfers; not heap them on top of each other hoping for some kind of balance.
I like the idea of the private account system, however if you want to win the hearts and minds of the public over to this idea, the practical questions such as those that monkeyboy raises have to be addressed. I saw a debate on CNBC in Dec. between someone from Cato (not Will) and the spokesperson for the AARP. The AARP completely trounced the Cato rep in the debate because she was focused on this idea of an ownership society, which I agree with in theory, but was completely unable to answer the practical questions such as “where is the money going to come from to support the current retirees if we implement private accounts?” America is much more interested in where Grandma’s next check is going to come from so she can have food and heat rather than the moral reasons for changing the system that provides her main source of income. While the arguments about one system being more or less moral than the other are very interesting, they won’t do much to sway public opinion, which is what will drive the politicians voting on the proposal.
The previous anonymous comment illustrates one dishonest leftist tactic in the SS debate– the notion that SS, as currently conceived, is all about making sure that “Grandma… can have food and heat”. In fact, making sure that elderly people have food and heat could be accomplished with a much less generous, more narrowly focused program than SS.
The recent NYT magazine article on the topic, written by an obvious left-wing opponent of SS reform, inadvertently makes this point while trying to make the opposite one. He says that if SS were abolished tomorrow, 48 percent of the elderly would be in poverty. But this means that slightly over half of SS recipients do not need SS payments to keep them out of poverty. And since people who earn more get higher SS benefits, that means that probably significantly *more* than half of all SS dollars now go to recipients who do not need that money to keep them from being poor!
Now the standard leftist response to this seems to be essentially, “yeah, but if we didn’t make middle-class elderly people into welfare dependents, the program wouldn’t be so popular, and eventually the now-unbribed middle class would vote to cut off even the poor elderly.” The problems with this argument are:
1. welfare programs for poor people have not in fact gone away in America and are not going to, though they were curtailed somewhat by Clinton’s reforms;
2. the people who make this argument also claim (see e.g. monkyboy’s third point above) that private accounts won’t work because those who get poor returns will be bailed out anyway, since it will be politically infeasible to just leave them to their fate.
BTW, the NYT article is at:
http://www.nytimes.com/2005/01/16/magazine/16SOCIAL.html?oref=login
And I notice, Nicholas, that you employ the standard looney libertarian straw man tactics of failing to address any of the valid arguments against the privatization of Social Security.
Many of us support the *idea* of private accounts, but worry that the implementation of them will cause more financial problems than they solve.
Until these concerns are addressed, Social Security reform, and more importantly, Medicare reform, will never happen.
Will,
By privatization of Social Security do you mean abolition? Because the moral argument is for abolition, isn’t it?
John, No I don’t mean abolition. There is a moral argument for abolition as well. If you buy that argument, then one argument for PRAs is that abolition is a shorter step from there.
I’m not sure how replacing a wealth transfer programme with a compulsory savings programme counts as a step towards ending programmes.
- Josh
“There is a moral argument for abolition as well.”
Is it moral to force people to save?
monkyboy, you wrongly assume that I support the Bush plan. I actually agree that private accounts as they are likely to be implemented by the Bushies will probably be a net negative for liberty. I’d much rather see a straight benefit cut, but this is probably a political nonstarter.
I’m just pointing out that the “SS is an essential safety net for everyone and cutting guaranteed benefits will leave old people starving in the streets!” bit is demonstrably wrong. What makes me want to tear my hair out every time I see a mainstream-media debate on SS is the obvious, enormous dishonesty on *both* sides.
raj,
And who is going to reimburse me for paying for having to be required to pay for the education of children who are not our’s–tye children who might be expected to pay SS for us?
I’m not sure what you are getting at here, but how are children from Thailand any less “your” children than children from Oklahoma, or Florida, or Nevada, or any other State you don’t currently inhabit? What does it mean to say that the latter children are “our” children while the former children are not?
Micha,
I’m also not certain what Raj was saying, but I took him to be referring to children that weren’t from his immediate family.
I thought that he was suggesting that it’s ok to demand that other people’s children pay for his retirement, because he has to pay for other people’s children’s education.
Will,
How much freedom would you like to see people have in the management of their “private” accounts?