What’s wrong with people owning things? Well, if people own things, then the government doesn’t really control it. Apparently it is worrying if the benevolent members of the political class don’t have the discretion to spend your money. I think it is impossible to defend on moral grounds that other things being equal, if the choice is between individual ownership and state control, we should choose state control.
One of the arguments in favor of individual ownership is that property rights create a shield against political predation. Yglesias, who seems to think that other things equal it’s better for the political class to control resources, blithely says, “Why worry!?“:
One [remark on the issue of the relative security provided by legally binding property rights versus the discretion of the politicians] is that while I’ve heard much touching concern from certain privatizers about this “Grace of Congress” issue, the more typical conservatarian complaint about Social Security is that due to the ever-growing voting power of senior citizens it is, in practice, nearly impossible to cut Social Security benefits. So the whole issue strikes me as being of academic concern only.
Matt is pulling a kind of probably unconscious bait and switch here. This is all too common among conservative opponents of progress on social security. Unless there is structural reform of the social security system, such as the implementation of personal retirement accounts, either there will be VERY LARGE future tax increases or VERY LARGE future benefit cuts. The problem with Big Senior’s hegemony and reactionary impulse is not that it makes benefits cuts permanently impossible by constituting an indefeasible coalition, it just pushes the decision into the future while the problem continues to mount. The further into the future we push the problem, the bigger the benefit cuts or tax increases will need to be.
Now, politicians are indeed averse to cutting benefits, due in part to the electoral muscle of Big Senior. Yet they are also averse to raising taxes, due to the electoral muscle of taxpayers. Unless we do something quite soon, the tax increases will need to be quite large. This may not be politically easy, and it is quite realistic to imagine that voters may prefer to cut benefits rather severely in order to avoid giant tax increases, at which point, politicians will cut benefits. Matt’s bait and switch consists in having us imagine that voter demand over policy-bundles remains constant despite the fact that the demographic unsustainability of the system will force tough trade-offs that will alter voter demand.
Matt’s argument is that senior citizens will never allow benefit cuts and so the “Grace of Congress” point is simply academic. Congress will always grace us, so why worry? Well, if Matt is right about the intrasigence of Big Senior, we’re going to need a giant payroll tax increase. Indeed, those who wish to stall serious structural reform are arguing for huge tax increases by default. But the real prospect of a huge tax increase is precisely the sort of thing that will shift voter demand so as to make benefits cuts politically feasible. And so by stalling, Matt is helping to bring into being the conditions under which the Grace of Congress argument gets real teeth.
Unless there is serious structural reform, reduced benefits become increasingly likely. That’s why it’s simply dishonest and incoherent to confuse a politician’s promise with a credible guarantee. There is no guarantee. There are no guaranteed benefits. There are promised benefits — promised by people who honor their promises when it benefits them. And, credibility of politicians aside, given the structure of the system, the promise cannot be kept.
The “conservatarian” argument is clearly not that Big Senior obstructionism regarding reform locks in a sure benefit level, but that it threatens benefits by making the problem ever more acute. At some point, the problem is so acute that the Big Senior coalition will not be political decisve regarding the issue of benefit levels. One main point of reform is to avoid the need to choose between tax increases and benefit cuts, and the political uncertainty the necessity of such choices would create.
A philosphical point and then a practical one.
Philosophically, you draw a fundamental distinction between a “politician’s promise” and a “guarantee.” But even fee simple property rights are only as secure as the political consensus securing them. In other countries, this isn’t very secure. If there is a political consensus that diverting the SS trust fund and payroll tax revenues is as unthinkable as defaulting on the public debt, then that is all the security you can get in life.
The Democrats are trying to create that kind of consensus, and if they beat Bush on this, then that will be more than just a “politician’s promise.”
More practically, I, for one, have no objection to reducing the level of political discretion as long as it is combined with the defned benefit.
What about Brad De Long’s proposal to vest the trust fund in nonpartisan trustees, who can make benefit cuts if necessary to maintain actuarial soundness? Congress would precommit future payroll taxes, and what the general fund owes in debt repayment.
I read Yglesias’ post, and he makes both these points.
Two points: Even with personal accounts, you don’t own the account. Can you take the money out and spend it? Can you borrow against it? Can you invest it where you like? Can you cash it out at 65? And if not, do you really own it?
Follow up: And if you don’t really own it, why engage the fiction of calling it a private or personal account? What is achieved by doing that?
Second point: Are personal accounts not socialism with a capitalist face? Let’s see: government ownership of with the pretense of worker control.
Sounds like socialism to me. I can’t wait till the special interests line up to lobby the trustee to change, say, labor policy at GM now that the SS administration votes 5% of the shares outstanding and has a seat on the board.
What’s really needed is a benefit cut. If we’re likely to get a benefit cut by leaving well enough alone, then let’s leave well enough alone.
If, on the other hand, we’re going to get stuck with a tax increase rather than a benefit cut, then we’ll have to figure out some way to prevent that from happening. I’d like to see some way to do that without setting aside a huge pile of money that the Social Security Administration tells you how you’re allowed to invest.
A philosphical point and then a practical one.
Philosophically, you draw a fundamental distinction between a “politician’s promise” and a “guarantee.” But even fee simple property rights are only as secure as the political consensus securing them. In other countries, this isn’t very secure. If there is a political consensus that diverting the SS trust fund and payroll tax revenues is as unthinkable as defaulting on the public debt, then that is all the security you can get in life.
The Democrats are trying to create that kind of consensus, and if they beat Bush on this, then that will be more than just a “politician’s promise.”
More practically, I, for one, have no objection to reducing the level of political discretion as long as it is combined with the defned benefit.
What about Brad De Long’s proposal to vest the trust fund in nonpartisan trustees, who can make benefit cuts if necessary to maintain actuarial soundness? Congress would precommit future payroll taxes, and what the general fund owes in debt repayment.
I read Yglesias’ post, and he makes both these points.
Two points: Even with personal accounts, you don’t own the account. Can you take the money out and spend it? Can you borrow against it? Can you invest it where you like? Can you cash it out at 65? And if not, do you really own it?
Follow up: And if you don’t really own it, why engage the fiction of calling it a private or personal account? What is achieved by doing that?
Second point: Are personal accounts not socialism with a capitalist face? Let’s see: government ownership of with the pretense of worker control.
Sounds like socialism to me. I can’t wait till the special interests line up to lobby the trustee to change, say, labor policy at GM now that the SS administration votes 5% of the shares outstanding and has a seat on the board.
What’s really needed is a benefit cut. If we’re likely to get a benefit cut by leaving well enough alone, then let’s leave well enough alone.
If, on the other hand, we’re going to get stuck with a tax increase rather than a benefit cut, then we’ll have to figure out some way to prevent that from happening. I’d like to see some way to do that without setting aside a huge pile of money that the Social Security Administration tells you how you’re allowed to invest.