I have very little to say in response to today’s New York Times editorial criticizing President Bush’s proposal to reform Social Security — mainly because the editorial itself doesn’t say much. For the Times, as for the Kerry campaign, the thought of guaranteed disaster seems somehow preferable to reform that might fail. There is simply no logic to such a stance, which makes a reasoned response difficult.
If I have to fisk something, I’ll go with this passage:
However Social Security is reformed, when younger workers retire, their benefits are likely to be smaller than the benefits promised to current retirees. But a partly privatized system would produce a cut that’s likely to be bigger and an income that would be far less reliable. That’s because the government benefit is cut more deeply under privatization, and how much you can actually accumulate in a personal account would depend on the stock market. Anyone who lived through the 1990′s knows that investing in stocks can leave you with less than you started with.
This is a classic fallacy among opponents of Social Security reform — that every penny diverted into personal accounts must be invested in “risky” stocks. No proposal I have ever seen includes such a provision, and as with IRA and 401(k) accounts, surely any personal Social Security account would have a zero-risk money market option — essentially a bank account. In fact, the system would almost certainly be structured such that a money market fund would be the default investment vehicle unless the participant actively chose to invest in stock or bond funds.
And as for seniors potentially making unwise investment decisions: well, many seniors also make unwise consumption decisions, yet no one suggests prohibiting them from pouring their paycheck down a slot machine in Atlantic City or blowing it all on Florida timeshares or two-buck chuck.
In fact, is there any substantive difference between: (a) diverting Social Security contributions into the stock market and possibly losing money, and (b) maintaining the current system, receiving a cash benefit and investing that in the stock market and possibly losing money?
Cato also has a response to the editorial, as does NRO.
POST SCRIPT: Speaking of the sophistication of seniors with respect to Social Security:
Fewer senior citizens are taking the government up on its offer to deposit their Social Security checks directly into their bank accounts, costing taxpayers millions.
…
It costs 68 cents to produce and mail each Social Security check, and the government sends out 13 million checks each month. That amounts to about $100 million each year.
…
But the government may face an uphill battle convincing senior citizens, disabled people and others receiving federal benefits. Many do not have a bank account, do not trust technology or are simply attached to the idea of getting a paper check, the study found. If they do not switch, the cost of sending paper checks will continue to climb as more and more baby boomers are added to the Social Security rolls.
Sigh.
Here are some of my recent major Social Security posts:
Social Security: Kerry Lies, Hope Dies
The Other Pension Crisis
The Social Security Meta-Crisis
Social Security: AvP GvK
Getting Kerry-ed Away on Social Security
Social Security: Read It and Weep
Social Security: What’s in the “Lockbox”?