Saturday, March 26, 2005

Another liberal in Congress doesn't "get it" on Social Security

An AP story today described another state-worshipper who both misrepresents and lies about the nature of Social Security privatization:
"This would have dire consequences including major borrowing and massive benefit cuts. It would mean the dismantling of Social Security as we know it," Rep. Sandy Levin said in the Democratic Party's weekly radio address.
The borrowing and benefit cuts are if we keep Social Security as it is, with current workers supporting current retirees, not if we privatize. There's $1.7 trillion in the "trust fund" that we'll have to start paying back in 2017, not 2018 as had been previously projected. The latest Trustees' report admits that at the bottom of page 2, and that the "trust fund" will be exhausted in 2042. But as anyone who understands the real nature of those "Treasury obligations" will remind you, the trust fund is hardly this huge pile of savings that Krugman & Co. would have you believe. It's a loan we made to ourselves, at 3%-something annual interest.

It's true that if we privatize Social Security, the loss of payroll tax revenue means we'll have to use alternate funding for those retirees not affected by privatization (current retirees, and those 55 and older who are still working). I don't quite buy the argument that there's eventually no cost, that privatization will pay for itself. But worst case, privatization is still cheaper than the constant hiking of payroll taxes -- and better than the alternative of benefit cuts.

It's an undeniable fact that keeping Social Security as it is, with the continuous demographic shift in our society, will require raising taxes and/or cutting benefits. If you bet on what Krugman, Pelosi, Harry Reid and all these others are stating, that we only need to "strengthen Social Security" with just a little tweaking...well, like Marlon Brando said in Guys and Dolls, you'll wind up with cider in your ear.

At least those of us supporting privatization are honest. We never said that retirement accounts were a free lunch or panacea. We're just saying that for the same money, real investment will give a much better return, and it has the moral superiority of your account being yours, not the government's. (It also promotes more fiscal responsibility because Congress won't be able to borrow Social Security payroll taxes as fast as they come in.) Nobody will be "left behind" because even the Cato plan has a safety net. What's there to lose?

I'll tell you who can lose: Congress, which won't be able to loot the trust fund (a point Donald Luskin made on his recent Kudlow & Co. appearance). Paul Krugman and his fellow state-worshippers will lose, because everyone at every income level will start to save real wealth for themselves, not for the government.

Notice how the Social Security Administration describes your "participation":
Participation in the Social Security program is mandatory with respect to the payment of Social Security taxes. Unless specifically exempt by law, everyone working in the United States is required to pay Social Security taxes on earnings from employment. These earnings are subject to Social Security tax without regard to the citizenship or place of residence of either the employer or the employee.
You're required to pay in, but do you notice what's missing? Take a close look. There's not one word about the federal government being required to pay us any benefits in return. That's because it isn't required to pay us anything at all! Participation is strictly one-sided. Like Michael Tanner said in the Great Social Security Debate, the Supreme Court ruled in Fleming v. Nestor that there's no implicit obligation for the federal government to pay us anything, though we're coerced into giving up our payroll taxes. We're only supplicants, empowered no more than to go "hat in hand" to Congress and hope they'll have something to pay us with -- which will be by breaking the backs of those current working, until the Ponzi scheme pyramid comes crashing down.

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