Danny Taggart's Blogarama

A more-or-less daily dose of news, politics, techmology, and any random thoughts that pass through my head.

Friday, December 17, 2004

Time to face reality on Social Insecurity

I was looking at this post from Mark Cuban on Social Security privitization and was suprised by its belligerent tone and ignorant argumentation. He makes a couple of points:

1. The nasty brokers will screw people over with bad investment products and high commissions.
2. People expect the government to bail them out, so they will take on high risks and lose their money.

The big problem with Mark's arguments here is that he compares Social Security with private accounts as if they are the same thing. Social Security is not your personal account. You have no rights to the money you have paid in - the Supreme Court has already ruled on this. The taxes you pay in go to the general fund, where Congress can spend them however they wish. It is absurd to compare rates of return or such nonsense between government-run and private Social Security accounts. The system is a sham, an illusion - it simply doesn't exist.

So what is reality? The reality is that after almost a century of living this dream in which everyone can have their wants without paying for them, the United States of America will finally wake up. The system will go bankrupt. It will be a cash drain on general funds, instead of a cash cow. Everybody knows this. Due to government failure, each person has to save for his own retirement now, along with paying taxes for a "benefit" that doesn't exist. Nobody who is young today expects the government to bail them out when they're old, as Mark claims. The only thing Bush's plan will do is help this process by giving people their money back so they can save it, instead of letting the pigs in Congress grab-and-spend it as they have for ... well, forever.

A lot of mumbo jumbo is being thrown around in the Social Security debate, so let's clear up the choices facing us here:

1. Don't pay out the benefits. This includes raising the retirement age or whatever scheme ultimately doesn't give people what they paid into the system.
2. Pay out the benefits, at the expense of the productive elements of society, and therefore, the economy itself.

Either choice by itself would cause an immense, possibly catastrophic, shock to our economy and society. The only reasonable choice is some mix of the two. This entails a lot of unpleasant pain that we don't want to feel; the hangover from our socialist experiment. It is imperative that we start early, so we spread this pain out over a long timeframe and reduce the probability of a lethal shock to the system. This is the essence of the plan to start privatizing Social Security.

The plan is not perfect. People should have complete control over their accounts, not be subject to certain government-approved investments. In this case, I agree with Mark that there is a potential for institutions to scam people, but only as a result of government restrictions on investment choices - and hence competition. Whatever argument the opponents of reform bring up, ultimately it boils down to the fact that the private accounts can't be worse than the status quo. We have to endure the pain that results from past generations' folly. It is amazing that smart people like Mark Cuban still don't realize this.