This is from a now very old Barry Schwartz column about why people are too stupid to manage their own finances, especially if their finances involve a Social Security personal retirement account, in the NYT. Old, but so bad I can't help talking about it.
This brings me to the final defense of privatization: the payroll taxes you pay are your money, and you ought to be able to do what you like with your money. This, I suspect, is the real justification behind the move to privatize, and it is the worst reason of all. The payroll tax is not “your” money; it's our money. Social Security was created as an insurance scheme, not a pension scheme. It was meant to provide a safety net, to protect the unlucky from immiseration in old age. The benefits we get are not payouts from accounts in which we have accumulated our own private stash. What we get is largely determined by what we earned, but we keep getting it even after we've taken out every penny we put in. And if we happen to die early, someone else reaps the benefits of our contributions.
That's refreshingly frank: it's not your money! OK. So, it's “ours.” Let's just skip over the fact that the entire Social Security system and the disinformation one regularly gets from the SSA is specifically designed to encourage the sense that there is some kind of property-like nexus of entitlement between the payroll tax and retirement benefits. (And that social insurance systems like ours are commonly called pensions systems around the world.) Perhaps Schwartz will forgive American voters for having the wrong idea here, and not realizing that they do not in fact have any right to their benefits.
Anyway, what is it that we're doing with “our” money? Well, we're sending over 90% of it back to the same income bracket from whence it came, that's what! Now why would we be doing that if what we wanted to be doing was “protecting the unlucky against immiseration in old age”? (Not to sustain the illusion that our payroll taxes do in fact belong to us as individuals, for sure!) I mean, wouldn't it be silly to pretend to “insure” people by taking money away from them (thereby increasing their exposure to risk!), and then simply replacing it later? That sure would be silly! Schwartz gestures toward the redistributive function of the program, but . . . there is almost no redistribution! And . . . it isn't progressive!
An authentic government old-age insurance program might look like government disability insurance. You pay taxes into the program and then you get money back if and when you need it–sort of like the way actual insurance works!
Hey liberals! Since you insist on talking about social insurance, why not stop dissembling and plump for a system that is actually sort of like insurance? Why not not defend a disability insurance model of old-age insurance, where you get it only there is some actual threat of immiseration? We can fund it with a dedicated payroll tax and everything. It really will not function like a pension at all. It will be a safety net for people who need it funded by people who don't. Isn't this exactly what liberals should want? TPM Cafe? Left2Right? Somebody? Why don't you love this idea? Really, I want to know.