As for the argument that the retirement portion of social security is not insurance because everyone gets at least some retirement payment from it, well, not all of it is insurance. The redistributive component (Joe Poor gets a much higher return on his payments than Bill Gates does) is insurance though.

Property rights — SS is a promise from the government that you will get money back in the future in exchange for your payments. If government breaks its promise, then you will lose your right. As others have pointed out above, if government breaks its promise to enforce contracts you will likewise lose your property rights in private contracts. Right now it is libertarians who are lobbying for government to break the SS promise after 70 years in which it was fulfilled, so its a bit rich to appeal to the insecurity of the promise as a reason to break it.

social security
social justice
social insurance
social credit

- Josh

I don’t see that. I would gladly support an SS program that means-tested benefits if it meant my payroll taxes would be substantially lowered, and I suspect this is true for a large percentage of those under 35 or so. (Obviously not among older workers, so it would have to be phased in very gradually).

To reiterate Will’s point, it’s insane that 20 years from now minimum wage workers will have 12% (at least) of their income taken and handed to Bill Gates, and I can’t imagine that correcting that would make SS less popular. Sure, we don’t like welfare, but we *really* don’t like welfare for the rich.

I’m less convinced by your claim that casually referring to Social Security as “social insurance” massively dupes the public. Most Americans today understand that Social Security is a benefit program that could theoretically be revoked tomorrow, just like Medicare or unemployment protection. That’s why it’s easy to demogogue the issue: if the benefits really were fixed by contract, it’d be much tougher to claim that Republicans are going to send your granny to the poorhouse.

Defeined benefit pensions are both savings and insurance schemes.

All pensions — defined benefit and defined contribution — are savings schemes.

The difference is that the defined benefit scheme shifts certain risks from the recipient to the scheme. That is an insurance feature.

Social Security also has disability and death insurance features, as well.

Your Calculator is misleading because it compares a “rate of return” for a defined contribution scheme to a “rate of return” for Social Security without recognizing that the insurance features of Social Security would cost something if you tried to acquire them on the market.

The “Grace of Congress” point does not make SS any less insurance. In the UK, Parliament could, in principle, pass a law expropriating someone’s house without compensation. Does that mean that UK citizens have no property rights? No, because, at least at present, it would be politically unthinkable for any Parliament to pass such a law.

Sure, property rights in the UK might be more secure if there was a justiciable constitutional right to them (although that would depend on whether the court system is more reliable in defence of property rights than political unthinkability, which is uncertain). So too, it would be better if Congress could not raid the trust fund for the general fund.

But how would you feel about a UK socialist who argued that there was nothing wrong with expropriating someone’s house without compensation, since the right to the house only existed by Grace of Parliament? You would denounce the transparent rhetorical attempt to make thinkable what is properly unthinkable. Just because Parliament or Congress can do something immoral or stupid, does not mean it should.

So “social insurance” is an apt description of the Social Security program.

I think it clearly is, since SS could be made a great deal less paternalistic (and more fiscally sustainable to boot!) without producing lots of indigent old people. For example, the current system pays more to people who need it less; Bill Gates not only will get SS benefits, he’ll get *considerably higher* benefits than Joe Schmoe who worked menial service jobs his whole life. So if everybody’s SS benefit were cut down to the level Joe Schmoe gets, you could cut taxes considerably without reducing the protections afforded to the Schmoes of the world. As far as I can see, the only social-minimum-ist excuse for not doing this is the “noble lie” argument.

Maybe, but I’m not sure. This is a tricky issue. I happen to believe that social security actually does benefit broad segments of the middle class in addition to the poor and it is for that reason that the program has such powerful support. While it might be misleading to view social security as insurance, I believe social security nonethless benefits most of the people covered by it and also benefits society more generally. Thus most citizens have reason to support social security for reasons independent of the issue of a social minimum.

However, I think we need to realize how important the idea of a social minimum is to the justification for social security. Social security has played a major role in reducing the poverty rate among the elderly from 65% to 10%. If doing away with social security would bring the poverty rate among the elderly to anywhere near its old level, then it is the case that social security functions as a social minimum for the majority of old people. So it seems to be in the interest of most elderly people to support social security on the grounds that it provides them with a social minimum on top of any other reasons they have for doing so.

I think you need to make a distinction between having a legal entitlement which could be altered by Congressional legislation, and not having a legal entitlement at all. As a matter of positive law, they are different. And, as a matter of practice, they are different too, especially if it would be politically impossible for Congress to enact the legislation abolishing the entitlement.

Nicholas:

I don’t deny that SS forces people to pay a premium to eliminate a risk they might prefer to take. That is why it is social insurance, not voluntary insurance. The question is whether you would rather see a little bit of paternalism or indigent old people.

I realize that you have firm philosophical commitments which mean you would rather see indigent old people. But the point here is really one of rhetorical hygiene. Your side has put forward these calculators as a fair comparison: our side is pointing out that you implicitly value the insurance aspects of a defined benefit at nothing, which is quite a bit less than the market would value them. I know you understand this, so who’s engaging in the “noble lie” now?

Retirement insurance is both rivalrous and excludable and is provided all the time on the private market– indeed it was provided to millions of people before SS was enacted. None of the excuses for having government provide defense apply to SS. (I agree with you, BTW, that we could be just as safe with 1/10 the defense spending).

Sure, some insurance companies fail. On the other hand

1. there are plenty that have stuck around longer than SS has existed, and some have lasted longer than most governments– think of Lloyd’s of London

2. there are many huge, stable reinsurers in the world

3. the risk of government default is low but not zero, and even without default Congress could legally abolish SS tomorrow.

So the risk of insurance company failure thus cannot be a sufficient justification for SS.