Faster, Please

I heard a bit of “Meet The Press” while running errands this afternoon (the audio is replayed on WSB 740AM in Atlanta). Tim Russert was quizzing–actually badgering–Mitch McConnell about the proposed personal savings accounts in Social Security. Russert’s question was (paraphrasing), ‘Okay, the president is proposing these accounts, but what do they have to do with the Social Security solvency problem?’

McConnell’s answer wasn’t very good. He basically repeated the well-known argument that you can make more money in the markets over time than you can relying on Social Security’s “return” (actually a government-set entitlement payment, not an actual return on an investment). As Rich Lowry notes, McConnell should have been more up-front about all the issues involved. Lowry’s suggested answer isn’t bad, but here’s what I would have said, if I’d been able to possess McConnell for a couple of mintues:

Look, Tim, Social Security is never going to be as good of a deal for today’s young people as it was for their grandparents, or even their parents. With people living longer, and fewer younger people having been born to pay into the system, the demographics just won’t allow it, and we’re coming up fast on a time when there simply won’t be enough money available to pay out like we’ve been paying out for the last several decades.

The time is going to come–and we can argue about when this will be, but it is going to happen one day–when we can’t keep the old promises any more without either cutting benefits, or having a huge tax increase, or realistically, doing both. That’s a pretty rotten thing to do to people who’re paying money out of their paychecks every day to support the current system, and reasonably enough think they ought to get a decent return on their money.

What private accounts can do, but the pay-as-you-go system can’t, is grow the pot of money available for people to retire on. The government can’t grow money, all we can do is tax or borrow, but the market can. With a private account that’ll grow for the next 35 years, a 30-year-old will have a cushion against the benefit cuts that will have to happen at some point in their lives–not tomorrow, not next year, but someday–to keep the government from going broke and their taxes from growing to Swedenesque levels.

We can’t tax ourselves out of this problem. There aren’t going to be enough people to tax. But we can use time and the market to give people a fair shake. We just have to start now, or the situation is only going to get worse.

I understand why McConnell (and Bush, for that matter) aren’t saying things like that: they think the Dems will jump on any reference to benefit cuts or tax increases to make 30-second ads and demagogue the issue. And what the hell, they’re probably right. But if they’re going to be serious about fixing this train wreck, they’re going to have to start talking seriously about the realities of the situation, and trust the people to understand what’s going on when the other side chooses to stick its fingers in its ears ignore those realities altogether, a la Kevin Bacon in Animal House.

All is not well. Making money in the markets takes time, and every day this situation doesn’t get fixed, we’re all getting worse off.


29 Responses to “Faster, Please”

  1. Sandy P Says:

    If 80% is fine for the American worker, 80% is fine for the congresscritters.

    No brave pubbie has said that, I see.

  2. rosignol Says:

    here’s what I would have said, if I’d been able to possess McConnell for a couple of mintues: …

    Likewise. Say it loudly and often.

  3. Ian Wood Says:

    You know, when I read “they think the Dems will jump on any reference to benefit cuts or tax increases to make 30-second ads and demagogue the issue,” I hear, “The Republicans are afraid that the American people are too stupid to withstand the onslaught of opposition propaganda.”

    Just be straight with us, for crying out loud. Stop basing the rhetoric of major policy initiatives on the fear that the people are so thick-witted that your case won’t prevail, even if it’s correct.

    If you’ve ever wondered why people distrust politicians of all stripes, this is an example, right here: politicians don’t trust us.

    Frankly, if you can’t make a case to overcome the opposition–whatever the makeup of your audience–then you don’t deserve to be in power. It’s a basic tenet of classical politics. Playing these kind of shell games just sets off the public’s bullshit meter, which is finely calibrated. And, if your ideas have genuine merit, then not presenting them on those merits is flat-out inexcusable.

    At some point, someone is going to have to give government “by the people” a real shot. What we’ve got now is government “by what we think the people can understand,” which is half-assed at best, and ineffective at worst…no matter which party is in the driver’s seat.

  4. Rod Stanton Says:

    These crises have been happening every 10 – 15 years since 1961 when we had the first tax hikes passed to bail out SS. Then again under Jimmy we had more taxe hikes. Then Dole raised the tax to the lazy eight (infinity) on part of the SS tax. While making one govt program into two programs with two sets of bureatcrats where there had only been one and two sets of bank accounts etc.
    The point is the program was never a “working” program and it has been in trouble ever since a significant # of people have been getting checks. It only “worked “in the 40s’ + 50’s when we had very few people -relative to the total population – geting checks.

  5. Rod Stanton Says:

    And Dole had the temerity to lie to us and say he was a conservative! I do not question his rock ribed Republicanism but a conservative? Only if Reagan and Goldwater were liberals.

  6. BeldarBlog Says:

    How private accounts will “fix” Social Security’s solvency problems

    After the last State of the Union address, I wrote that

  7. profligatewaste Says:

    An equally appropriate Animal House reference in this case would have been Kevin Bacon bent over yelling “Thank you sir, may I have another!” between whacks on the ass.

  8. Dishman Says:

    I heard that Hagel (R-Neb?) is talking about raising the retirement age. That works for me, too. He was only talking about 67 or 68, though.

  9. Jody Says:

    Longterm, I view private accounts as a way to get us back to a 4:1 worker to retiree ratio.

    Figuring you’ll work for 45 years (20-65) and retire for 15 (65-80), you’re supporting 1 retiree with 3 workers. It just so happens that the retiree and the workers happen to be the same person spread out over time.

    So where does the 4th come from? Compound interest.

  10. Gene Says:

    Right On, Will!

  11. George Says:

    Democrats are being just plain dishonest
    about the Social Security problem:

  12. Ken Says:

    The accounts have jack to do with the Social Security solvency problem. Reducing current FICA collections has exactly the same effect on solvency as personal accounts do, only the personal accounts allow less leeway for people to make the best use of their “personal” money.

    The remaining Social Security benefits will be a ripoff whether or not people are forced to save additional money in “personal” accounts or not. Benefit cuts will be needed no matter what, and there’s no good reason to force people to save (they would anyway, especially with reduced SS benefits) and use their returns to mask the benefit cuts.

    The best possible solution is to shut down the FDA, lift other controls on the medical industry, and allow faster innovation in that industry to completely remove the need for retirement…

  13. Jon Says:

    Just to confuse the issue, let’s propose selling off all US Government property, except National Parks, and close the Department of Interior, or at least BLM.
    Use the proceeds of the sale to open a REAL trust account, maybe in Switzerland so it will be legit, to finance the transition to a real private pension plan.

  14. Tongueboy Says:

    An increase in the number of SS contributors could delay the day when increased taxes or benefit cuts are needed. There are several million Federal employees whose Thrift Account contributions could be diverted to the SS Trust Fund. What are we waiting for?

    Oh, yeah, that’s right — intellectual honesty amongst the Social Security reactionaries that would impel them to suggest such a step. Well, I won’t hold my breath.

  15. Dub Dublin Says:

    I agree with this, as well as the take on NRO recently that the Bush administration should refer to private Social Security accounts as the “lockboxes” they are, protecting your benefits for the future. The problem is, though, that Social Security may well be flat-out unsustainable in the long haul even *with* the addition of private accounts. Maybe its time for a politician with the cojones to call for the complete abolition of the whole ridiculaous Ponzi scheme. (This sort of thing is illegal if anyone but the Government tries it, and there’s a very good reason – the whole thing has to collapse sooner or later.) I’m 42, but I’d happily walk away from everything I’ve paid in to date if I could just cut my losses – I expect there are millions that feel likewise, so really, killing Social Security outright is NOT the third rail it’s so often portrayed as. In fact, I strongly suspect that that falsehood is very deliberately perpetuated by the liberals precisely because they actually do have a clue how many people would be in favor of completely eliminating Social Security if given the chance. With “everything on the table”, it’s time to seriously consider the one option that would actually keep us, our parents, and grandparents from selling our children and grandchildren in economic slavery. This is the cruelest sort of liberalism, but very much in line with the traditional liberal goal of turning as much of the populace as possible into slaves on Uncle Sam’s plantation.

  16. William Duffy Says:

    Let’s go with the fact that we are an intelligent electorate? We all know something is wrong. Just keep playing all the past statements of when Clinton was President and all the liars were on board Et.all Kennedy,Biden…… saying that the system has to be fixed. Now the liars are saying there is nothing wrong?? if they keep playing this card the people will respond. how about a National Referrendum to see if the majority would like the option of personnel control of a portion of their money. We are not stupid. Keep the faith.

  17. Xmas Says:


    In 2002, the Federal Government employed about 1.9 million civilian workers, or about 1.3 percent of the Nation

  18. Bob White Says:

    Dub – Is it too much niggling to complain about the overuse of the word “liberal”? These people aren’t really liberal, they’re socialists. Jefferson was a liberal. Let’s call a spade a spade.
    That said, SS is certainly a Ponzi scheme. Only Congress could get away with such a scam, as well as with the pretense that the trust fund is an asset, when in fact it is a liability. For this alone they should go to jail, but the ultimate insult is that Congress (and its staff) is itself exempt from this awful pseudo-retirement program, having a separate program that permits personal accounts!
    Not that Congresspeople need a retirement account, because after serving for a mere 5 years, they will receive their Congressional salary every year until they die.
    Jail is too good for these bastards.

  19. fnook Says:

    I don’t have a problem with the current Social Security system. I guess that makes me a socialist, or whatever. Regardless, this comment thread is kinda scary. Where does all this bitterness and resentment come from? The US faired pretty well over the last century, no? And if you want to talk about dishonesty, why doesn’t your man Bush just level with the American people and just come out say I don’t like Social Security and I think we should get rid of it. I’d respect that. Instead he’s decided to shift into permanent used-car salesman mode. It’s embarassing and, frankly, un-presidential if you ask me.

  20. slarrow Says:

    It’s not that Bush wants to get rid of Social Security–not now, certainly! That would be horrible to those folks who will rely on it over the next ten or fifteen years; it would be failing to honor an obligation, and there’s nothing good about that, no matter how thoughtless the obligation.

    What I think Bush does want to do, though, is wean the American people off Social Security. That’s the entire point of personal accounts. I think that, if the initiative passes, in twenty-five years people will be used to paying for their own retirement again. If they can then take their personal accounts and leave the system, that removes the otherwise massive obligation the younger earners would have had to bear. Less obligation means taxes can be lowered and the younger earners can use the money to pay for their own retirement as well.

    Ponzi schemes continue because the latecomers have an incentive to stay in the system; otherwise they get the shaft. Personal accounts remove that incentive over time. Again, it’s weaning the US off the Ponzi scheme; I’m surprised I haven’t seen that analogy before.

  21. Ken Says:

    “The US faired pretty well over the last century, no? ”

    Depends on what you’re comparing it against. Compared to the rest of the world (i.e., the ones that downed the whole pitcher of socialist Kool-Aid instead of just a glass or two), we’re doing well. Compared to what might have been, and what people who didn’t realize just how much stagnation socialism produces once tended to predict for their future and our present, we’re living in the Dark Ages.

  22. Aubrey Says:

    This post is the most clear explanation I have seen of how individual investment accounts would add value. Excellent.

  23. Another Rovian Conspiracy (ARC) Says:

    Savins Soshsecurity

    […]The problem is that the GOP seems to still be arguing the Social Security issue in the framework established by the Dems…. not a good sign for a party in the majority, although the MSM certainly amplifies the Dem’s frame of reference on almost…

  24. mark Says:

    People MAY do better with private accouts, but the fact is past high returns are in the past. If larger numbers of people were investing, prices would have risen, reducing expected future returns (1982 – 2000 bull market anyone?). The problem may be moot, as low personal savings will not allow retirement.

  25. mark Says:

    – SS estimates paying 73% of expected benefits, from which medicare b premium is deducted, using up the inflation adjustment included in SS. The tax laws for SS are not inflation adjusted, making after med b SS a fully income taxed fixed pension in the future, in conjuntion with required 401k withdrawals.

  26. BD Says:

    Ah, the greatest of the rightist myths has always been that of the money tree:

    “What private accounts can do…is grow the pot of money…”

    Grow the pot of money? Such a magnificent pot, indeed. Do tell me where to find one so that I may add sage and a sprig of mint and stew a pair of pheasant hens (in season, of course) to serve with Ojibway lake rice. Would you suggest a nip of tawny port during the cooking and a crisp pino gris with the meal?

    This brings us back to the growth of wealth. I won’t go into the circumstances that lend credence to this myth: the post WWII era bringing us massive global wealth redistribution, the advent of the consumer economy, the artifice of the recent and unsustainable credit balloon. What it comes to is that the brown peoples of our great green and blue rock, upon whose backs we’ve ridden for so long, have done been squeezed. Nary a drop remains. Of course, you could print money like the Weimar Republic, when stacks of cash were measured with rulers on payday instead of counted out one bill at a time.

    Ah, the creation of wealth. (What was it Goebbels said about repeating the lie?)

    But then what do I know. I’m a cranky, well-fed, socialist, sensualist poet: long in the whisker and carrying a touch of gout to boot (sic!). My weenie only works pending the availability of good Bordeaux and grass-fed charolais tenderloin, and three women have left me for better lives, though we’re all still great friends.

    At the very least, be honest of your intentions: you want to eliminate social(ist) security altogether. Replace it with the Almighty Market where wealth can be “grown” in pots and the masses are somehow magically fed by what trickles down. “Dern gummit, it’s not government’s place to provide handouts…leave it up to the individual and his bootstraps. It’s a fellow’s own initiative, and if he makes bad choices in life, so be it. Let him rot in the gutter, the swine.” What, with a healthy minimum wage of five bucks and some change (and Republican Senators continuously pushing to raise this already generous bar further), he can continue to work until ninety and live like a king, right?

    Had the rightists the courage of their convictions they’d admit this goal and be done with it. The next law: the beating of the poor with pistol handles and Bibles, allowed on Wednesdays, Sundays and holidays.

  27. Ymarsakar Says:

    That’s not true, all of “us” are not getting worse of.

    Not if you include the Congressmen and women, not if you include the unionists.

    They have PRIVATE accounts in the form of bonds, stocks, or what not in their pensions.

    Obviously, it’s “risky” enough for them. But too risky for us young idiots.

  28. Who Can Really Say? Says:

    What About Me?

    One of the things I haven’t blogged about (an easy thing to do when you’re not blogging) is the whole Social Security reform thing. I’m ambivalent about the private/personal accounts being pushed by Bush. On the one hand, I…

  29. David D Says:

    This is all based upon a lie. Aside from an accounting ledger, there is no Social Security account with real assets, just like there is no DoD or NASA account. There is only one Federal account, and it is labeled ‘Spend.’

    Here’s my take:

    Bush: People aren’t saving for their retirement. When they get old, they’ll be poor and a drain on society. Let’s force them to save, and cut payroll taxes by 1.5% so they don’t notice.

    Most Democrats: Cut taxes?! No!

    Money is fungible. Taxes paid can be spent on anything, and usually are.

    Want to secure your kid’s future? Open a Roth IRA when she’s born. Put in $2000 per year – $40 per week, less than $6/day – until she’s 10. Then stop.

    IF the stock market average return is the same in the next 50 years as the past 50, she can retire at age 59 with about $1,200,000 in assets. All from your ten grand. If she dies untimely young, the grandkids inherit the money.

    This works for sons, too.

    Imagine the horror if the market did poorly for 40 years, she never saved a dime, and had to retire at age 59 with only $700,000.

    Oh, the injustice of it all.

    Forty bucks per week is about what someone making $8 is paying into social security right now (counting employers match – 40*8*.12=$38.40).

    The same money going to SS will get your daughter little at age 67 and nothing for her kids.

    BD – I like your verbage, if not your reasoning.

    “Ah, the creation of wealth” – yeah, like the world is no wealthier than it was 200 years ago.

    If you write the greatest poem of all time, set it to music, and make $50,000,000 while enriching humanity, has not wealth been created?

    Wealth can be created. The materials needed to build a house are worth less than a house.

    Wealth can be destroyed. Think 9/10 vs 9/12.

    I don’t live ‘like a king.’ I live much better than almost every king who ever lived.

    I have agents scouting the globe for me to bring me the finest vintages and fruits out of season; I have butchers procuring well-marbled cuts of beef, chefs who trained for years to prepare it for me, and people to serve it to me while I laugh with my friends. Farmers endeavor to keep me supplied with fresh asparagas, spinach, snow-peas, and all manner of veggies even when the ground is frozen. Brave fishermen sail the globe in case I might have a whim for crab, salmon, or Chilean sea-bass at any time. I sleep on cotton from Egypt, and walk on rugs from Persia and Afganistan. I can summon anyone I know to speak with me at a moments notice (um, well, if they answer their phone). I have hundreds of musicians at my disposal, and I can play their music when ever I want to hear it. Professional singers, actors, and dancers travel for thousands of miles to perform for me. In contrast to my peasant ancestors, I don’t even clean my own clothes: I hand it to the washer, then I hand it to the dryer, then it is done. As for personal security, there is a local force of over a thousand to keep me safe; my army numbers in the millions.

    There is one big difference between me and a king, however:

    I’m unemployed.

    I’m also waaay off-topic.

Comments are closed.

%d bloggers like this: