Schilling on Social Security

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Jason Kuznicki

Jason Kuznicki is a research fellow at the Cato Institute and contributor of Cato Unbound. He's on twitter as JasonKuznicki. His interests include political theory and history.

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101 Responses

  1. “Well, nuts to all that. I don’t believe it. I just don’t. Where, for starters, is the evidence?

    Where’s the evidence? Look at the cars we drive, the houses we live in, the credit card debt we pile up.

    I am not, by any stretch the imagination, arguing that the Gbment is or can do a better job, and certainly *I* could do a better job with the many thousands of dollars we send off as payroll taxes on what my wife and I pay ourselves (much more than our income tax burden.)

    But the electorate has proved — maybe not beyond a shadow of a doubt, but certainly by the preponderance of evidence — that it can’t manage it’s own financial affairs and it won’t elect politicians who will manage the nation’s financial affairs.Report

    • I’m inclined to agree with your implicit premise, Tony, but to be fair to Jason one undoubted factor in the lack of savings is the belief that Social Security will bail you out (although the jury is still way out on degree of impact that has on the savings rate).Report

      • Avatar North says:

        The pre-SS history doesn’t bear that theory out. Though I agree there’s some weight to the assertion that we live in a different economy than the 1920’s.Report

        • Different. Yes.

          Not too long ago, James Fallows wrote that an important distinction between the US and China was that the US had smaller problems that were less likely to be addressed and that China had bigger problems that are more likely to be addressed.

          None of this, BTW, so be taken to me that I’m arguing against phasing out Social Security. I don’t think there’s one sane person that doesn’t know that the age of receiving benefits should be moved up, and we can move it up to 175 as far as I’m concerned.

          But it’s not going to happen, or at least it’s not going to happen until it’s the least bad of a range of terrible options. Cause that’s how we roll.Report

      • Avatar ThatPirateGuy says:

        I cannot name one person my age or younger who believes that.

        In our eyes SS is a mythical payment that might be enough to afford catfood when we retire. My generation has been taught that our retirement will be a hell-scape for any who didn’t save. Not that we have saved we are of course convinced we will never grow old.Report

        • I’m convinced I’m going to be old, rich and spend most of my time fishing.Report

        • > My generation has been taught that our retirement will
          > be a hell-scape for any who didn’t save.

          My generation has been “taught” that, too (I’m 40 this year, for the record). However, they don’t seem to have learned that lesson whatsoever (evidence: everything Tony mentioned above).

          So either they implicitly still believe in the magic of somebody to come along and help them out (whether or not it’s under the label of “social security” or not isn’t really relevant), or they’re just completely farking crazy. Because they’re demonstrably *not* saving any money.Report

  2. Avatar North says:

    Correct me if my memory is faulty here Jason but as I recall in the wild free years before social security didn’t the majority of the elderly end up either living with their children or working until they dropped in the traces?
    My memory on the subject is pretty vague since I only got my American history from reading (Canadian history now that I know decently well) but as I understand it the Great Depression brought about Social Security because there were few jobs for anyone, elderly or no, and thus both of the options for the elderly became untenable.

    As to whether one can “trust” the people to save for their own retirement? I think we both know that answer. People generally didn’t save sufficiently before SS, they don’t save enough now and I don’t see any reason why they’d start saving enough is SS was done away with.

    It certainly seems like sound enough libertarian principle to do away with social security. But in practice (especially in this era when all forms of pensions are turning into pumpkins) it sounds like a recipe for working till you drop or living on your kids. I don’t think it’ll fly with the electorate and I’m not convinced that it should.Report

    • Avatar Jason Kuznicki says:

      Correct me if my memory is faulty here Jason but as I recall in the wild free years before social security didn’t the majority of the elderly end up either living with their children or working until they dropped in the traces?

      Many did work until late in life. That’s no longer necessary, with or without Social Security, thanks to higher productivity.

      As to living with one’s children, isn’t that a lot better than living alone in a state-subsidized senior citizen farm? I’m serious. The idea that senior parents should not live with their adult children is pretty strange when you think about it. Who better to live with than them?Report

      • Avatar ThatPirateGuy says:

        Such a living arrangement is surely better when it is voluntary rather than forced by economics? Incidently a state which is currently acheived with my grandmother and my girlfriends mother.

        I hate to mention it but wouldn’t this potentially have an impact on the possibility of grand-children? Opportunities and so on. I mean I love Beth’s mom but I kind of like having just me and the cats around for the moment.Report

      • Avatar North says:

        Well if current trends are at all indicative they’d still be put into senior citizen farms, whether state subsidized or not, because their kids simply don’t/won’t have the time or resources to look after them. Also lest we forget Jason people have a lot fewer children now days. That said I agree that I don’t have a problem with it per say (other than that the idea of my husbands’ Mother proposing to move in with us makes me reach for the scissors on my desk to slit my wrist).Report

      • > Many did work until late in life. That’s no longer
        > necessary, with or without Social Security, thanks
        > to higher productivity.

        Okay, I jumped in on Tony, now I’ve got to give you a “Hey, wha?” on this one.

        It may not be sociologically necessary, but it’s certainly individually economically necessary at this point. Almost everyone I know who is at or near retirement age isn’t planning on retiring anytime soon (if ever).

        You’re going to have to convince me that you’ve got a “how to get there from here” plan for me to buy this one, Jason.

        > As to living with one’s children, isn’t that a lot better than
        > living alone in a state-subsidized senior citizen farm?

        Absolutely, but it’s a best arguably the same (probably worse) than continuing to live an independent life. Since this is becoming increasingly technologically possible, should we put two generations worth of “never expected to move back in with my children” in with their children who never expected to have their parents move in (and all the corresponding fallout that would come with such a move) or should we perhaps move away from state-subsidized senior farms to state-subsidized (to some as yet indeterminate degree) independent living?Report

        • Avatar Matty says:

          Disorganised thoughts on retirement homes or senior farms if you prefer.

          When my grandmother was diagnosed with Altzheimers my grandfather refused to consider her going into residential care for several years. He did consider but eventually rejected them moving in with my uncle and stuck with independent living despite his own failing health.

          Eventually Gran did have to go into a home but by that point she needed 24 hour nursing care, something that would have been hard for family family to provide.

          Because of this experience I’m generally skeptical of what seems to be the common view that people retire and then move into retirement homes just because thats what old people do or that moving in with family is an adequate alternative. If someone is capable of feeding and dressing themselves and the other aspects of independent living I’d expect them to keep doing so. If they cannot do those things I’d expect them to be sufficiently ill (for want of a better word) that having a family member around for part of the day when not at work would not provide sufficient care.

          Of course this is based on personal experience and doesn’t touch on those cases where people move in with their children for financial or emtional reasons rather than as an alternative to residential care.Report

  3. Avatar E.C. Gach says:

    “To hoist liberals with their own petard here: For the typical worker, Social Security earns a really, really lousy rate of return. In plain, self-interested English: That means it’s a bad deal for your core constituency. Its payroll deduction is also among the most regressive taxes that we have.”

    If those urging privatization would sign an oath that doing so would boost the rate of return for all retirees who receive it, and that if such was not the case, they or their children would have all their property confiscated by the state, I’d be all for it.

    Simply put though, there are winners and losers now, and there will be winners and losers after privatization. The question is whether there will be more winners or more losers if privatized, and what the disparity between the winners/losers would be. I personally don’t see how privatizing SS would make it any more egalitarian (evil word, I know), and if SS is looked at as a social safety net, rather than a glorified state run retirement plan, I don’t think we’d be having this debate. You would only get larger returns through increased risk.

    Increased risk is the exact opposite of what the program is designed to provide.Report

    • Avatar Jason Kuznicki says:

      I’m not certain of a better rate of return for everyone. No honest person could be. So that kills any possibility of reform from the outset.

      However, we can be certain of no change in benefits for the indigent, if we set up the program correctly. That’s not hard to do at all. We can also be certain of removing a regressive element from our tax structure, or at least of greatly reducing it.

      People earning enough that they could save on their own aren’t in my opinion supposed to be objects of charity. Only people who can’t.Report

      • Avatar North says:

        Another thing SS does is strip out the risk. Even if you save sufficiently you’re only one sly broker or huckster away from penury under a private system. I agree this would be the exception to the rule but it’d be highly visible. SS’s rates of return may be lousy (though for low income people my understanding is that it’s actually an excellent or even a lavish rate of return) but there’re not very good odds that a crooked bureaucrat is going to take off for Mexico with the entire nest egg.Report

    • Avatar E.C. Gach says:

      You can easily make SS solvent by in fact making the payroll tax less regressive (raising the cap).

      But so when we get to the end of the line, and a bunch of old people have saved, and a bunch haven’t, we just let the chips fall where they may?

      I could be fine with that. Hopefully the middle class will have rebounded by that point in order to support their parents for the last 10-15 years of their lives.

      After all, the last thing I want to have to do is pay to feed, house, and cloth other people’s irresponsible parents.Report

      • Avatar Jason Kuznicki says:

        The problem is that what you’re paying for is often not the care of the elderly, but the warehousing of them.

        If they have managed to save, they might either live on their own, or with children, or in an assisted living facility if they need it.

        If they haven’t managed to save, there would still be something like the indigent protections I’ve said would stay in place. Obviously we would have to have a graduated system, so no one would face a serious disincentive to save, but the point is that this could be done, and that objections on welfare grounds are really weak.Report

  4. Avatar E.C. Gach says:

    To get at the heart of the post, why exactly would mandatory transfers from me to the government to the bank, and then back to me at some point, be unconstitutional (or extra-constitutional, read: beyond)?

    Unless all transfer payments are unconstitutional.

    “Compelling someone to buy a product seems to be a problem in both cases”

    At what point does a series of money transfers become a product? Is a service a product?Report

  5. Avatar Francis says:

    the bloated, budget-busting, inefficient middle-class entitlement Ponzi scheme that we have today

    Did you get in all the Cato-approved buzzwords in that one phrase or did you miss a few?

    bloated — meaningless term with adverse connotations. Size does not have anything to do with degree of excess. The management costs of this program are far lower than any private retirement plan.

    budget-busting — flat false, and you really should know better. SS is self-funded and has been running an excess to get ready for the baby boomers since Pat Moynihan and that apostle of conservatives Ronald Reagan raised the tax rate. The excess is invested in America via the purchase of T-bills.

    middle-class entitlement: yup. And a good one. Elder poverty rates have tumbled since SS was enacted.

    Ponzi scheme: this is the usual tip that someone’s not really interested in an honest debate. A Ponzi scheme by definition must go bust; due to the time lag between investing and obtaining the return on investment, SS like all other social security schemes around the world can go on indefinitely.

    lousy rate of return: that’s actually very difficult to prove. Last time this issue came up at the beginning of Bush II’s second term, the investment calculators generated by the libertarian think tanks were demonstrably worthless. No private insurer sells a product equivalent to SS, so there’s no market price for the product. The big life insurers, iirc, actually refused to quote prices for a SS-equivalent product. SS returns are based on the growth of the economy as a whole, which is a conservative investment strategy but not necessarily a bad one.

    regressive: wrong. The poorer you were as a worker, the better you do. Read up on bend points. The people who max out their annual contribution send some money downhill, on an actuarial basis.Report

    • Avatar Mad Rocket Scientist says:

      re: Budget Busting & Ponzi Scheme

      Had Congress never touched the SS Fund except to pay benefits, you’d be right, but they didn’t. They raided that fund over & over again & replaced the money with T-Bills (or some equivalent). This is the accounting equivalent of raiding my piggy bank and replacing the money I take out with a slip of paper that reads “You owe yourself $5”. So while it is not technically a Ponzi scheme, the program is relying on current SS income from workers to pay the benefits of those in the program. Seeing as how our retirement age population is growing (& living longer), the current scheme is not sustainable without an increase in the contribution.Report

      • Avatar North says:

        In practice Mad, yes, but legally speaking those T-bills are the same as dollars. They have just as much claim on future revenue as any other portion of the governments debt, in many cases more so.

        So when people talk about SS being insolvent they’re being inaccurate. SS is not in danger of becoming insolvent, the entire government is in danger of such a thing due to bipartisan fiscal perfidity for decades.Report

        • Avatar Mad Rocket Scientist says:

          Very true, the trust fund is exactly as solvent as our government, which is rapidly becoming not (some claim it has already past the point of solvency).Report

      • Avatar Jonny Scrum-half says:

        I’m confused by your problem with the fact that Congress “raided” the SS Trust Fund and “replaced the money with T-Bills.” What would you have had them do with the surplus — put it in a big pile in a room in some government building in Washington? Please explain to me why it was a bad idea to invest that surplus in T-Bills.Report

    • Avatar Jason Kuznicki says:

      bloated — meaningless term with adverse connotations. Size does not have anything to do with degree of excess.

      Nonsense. If a $1 million federal program goes 10% over budget, no one notices. If a $1 trillion federal program goes 10% over budget, we have a bigger problem.

      budget-busting — flat false, and you really should know better. SS is self-funded and has been running an excess to get ready for the baby boomers since Pat Moynihan and that apostle of conservatives Ronald Reagan raised the tax rate. The excess is invested in America via the purchase of T-bills.

      The Social Security trust fund is a fiction full of IOUs. Its primary purpose is to mask how indebted we are.

      middle-class entitlement: yup.

      There was a time when people would be ashamed of this. Taking charity money when you don’t need it. And bragging about it. That’s just flat revolting.

      Ponzi scheme

      If I were running it myself, they’d put me in prison. Even if it were 100% voluntary.

      lousy rate of return

      We can debate this one. I’ll admit it’s the weakest of the lot.

      regressive

      This one I get from my liberal friends. Complain to them if you don’t like it.Report

      • Avatar Francis says:

        The Social Security trust fund is a fiction full of IOUs. What complete and utter bulls*t. T-bills are the duly issued debt of the US. T-bills have value solely because the US govt says they do. I suppose that the non-SS T-bills held by financial institutions and governments around the world are ‘fictions’ in that they are backed only by the willingness of the US govt to live up to its debts. But repudiating SS T-bill debt and non-SS T-bill debt will have catastrophic consequences for the economy and people of the US. Really want to go down that road?

        charity … put me in prison. You’ve really got nothing, don’t you. It’s not charity, dumb@ss, because people are getting their own money back. And the reason you can’t run the scheme but the government can is that it’s the government and you’re not. If it were voluntary, it would be just a 401(k) plan that invested solely in T-bills. But it’s not voluntary and that’s the point.

        Cato and Reason would have a lot more credibility with people who actually look into this issue if they focused solely on the mandatory aspect. But that argument was lost back in the 40s. So instead you throw around all this meaningless bullsh*t about bloat and Ponzi schemes.Report

        • Avatar Jason Kuznicki says:

          We can have a civil discussion, or you can call me names because you don’t agree with me. Your choice.Report

          • Avatar Francis says:

            I haven’t called you a name yet; I’ve said that your arguments are the same tired nonsense that got thrown around the last time SS privatization came up.Report

            • Avatar Jason Kuznicki says:

              So the “dumb@ass” was directed at someone else?

              Or does it not count when you use an @?

              Either way, you’ve done far better in the past than just now. I’m sorry you don’t agree with my arguments, but that’s just going to have to be that.Report

              • Avatar Jonny Scrum-half says:

                I won’t call you names, but I agree with Francis. How has the SS program been “budget busting”? As Francis noted, it’s run a surplus for 20+ years, as it was intended to do when Ronald Reagan increased the payroll tax. Is your problem with the fact that the program ran surpluses, or with the fact that the surpluses were invested in T-bills?Report

              • Avatar Jason Kuznicki says:

                My concern is not with the past, but with the future. That surplus is ending shortly, and benefits will have to be cut in the coming decades, or else taxes will have to be increased. I don’t care for either scenario, so thinking about alternatives seems like maybe a good idea. I don’t understand why that should be difficult to grasp.Report

              • Avatar Jonny Scrum-half says:

                I don’t believe that thinking about alternatives is a difficult concept to grasp. I’m frankly not sure whether anything needs to be done, but it sure seems sensible to me to raise the SS age limit by a year or 2.

                I simply disagreed with your assertion that the SS system is “budget busting,” because I don’t see how it is. You’re the one who called investing in T-bills “a fiction full of IOUs.”Report

              • Avatar Matty says:

                If T-bills are debt from other parts of the US government then doesn’t that mean the fund is owed money?
                Now if I lend someone money and they have trouble paying, which of us would you say has financial problems?Report

              • Avatar Simon K says:

                If I lend you $100 and you have trouble paying, you have a problem. If I lend you $1bn and you have trouble paying, I have a problem.Report

              • Avatar North says:

                Jason I luv ya but I’m gonna have to agree with the commiedems (I kid, I kid!) on this one. The Social Security trust fund is full of T-bills, yes, but so are the Chinese Foreign investment portfolios and the balance sheets of innumerable Arabian oil monarchs and international companies. None of their assets are being called fictitious so I don’t see why the SS trust fund gets the distinction.

                As a practical matter I agree, the free ride is ending. But as a legal or accounting matter the social security fund is highly solvent.Report

              • Avatar Simon K says:

                The social security trust fund gets called fictitious because it can’t actually be used to pay for anything without the federal government either raising money through taxes or issuing debt. Even if the social security administration could sell its T-bills (it can’t in fact because they’re “specials” that are not transferable) it would be exactly equivalent to the government borrowing the money by a new public issue. So it may or may not “exist”, but whether or not it exists has no impact on what will need to happen to pay future social security benefits – lower benefits, higher taxes, or more debt held by the public (not the SSA).Report

              • Avatar E.C. Gach says:

                I think people generally support raising the cap on taxable income. Am I making those public polling numbers up?Report

              • Avatar Matty says:

                Am I alone in reading the @ sign as ‘at’ as it is in email rather than as ‘a’ and if not what is a dumbatss?Report

        • Avatar North says:

          Dude, your arguments will carry more weight if you leave out the gratuitous name calling. I don’t want to be a scold (especially since I agree with you on the argument itself at least partially) but we don’t want to lower the discourse.Report

        • Avatar Jaybird says:

          Lighten up, Francis!Report

        • Avatar James K says:

          The problem with the T-bills in the trust fund isn’t that they’re not legally enforceable, it’s that the US government holds both ends of them. An asset is a claim on another party’s future income. It doesn’t work if the income you’re claiming is already yours. If the trust fund’s assets were to magically disappear in the night, the US government’s assets would be less, but its liabilities would be lower by the same amount, making the net financial effect 0.Report

  6. Avatar Mad Rocket Scientist says:

    Why can’t we have an either/or option?

    Say I don’t believe in the viability of Social Security (I don’t), why can’t I have the choice to take the payroll deduction and instead of sending it to the government, I send it to my 401K, or IRA?Report

    • Avatar Bob says:

      Because 1. the pool paying into the system must be sufficiently large enough to support it and 2. do away with the “free rider” problem. If you fall short in securing your retirement the odds are grate that you will seek and need state assistance.Report

    • Yeah, what Bob said.

      If you blow your wad, you’re still going to be taking up a slot in the ER when you get sick and don’t have medical insurance or private funds but need antibiotics. Ditto food kitchens, etc.

      The only recourse here is to change the way we handle exception scenarios from “default serve” to “default deny”. While this is certainly doable from a technical standpoint (it’s certainly debatable whether or not it’s politically feasible, but it’s just a set of rules after all) the impact on the first responders would be, well, bad.

      Based upon the psych profile of your average first responder, you’d likely have a lot fewer firemen and cops and nurses and doctors if they had to check fiscal wherewithal before providing service, not to mention the fallout from incidental death/damage.Report

      • Avatar Mad Rocket Scientist says:

        I’m not suggesting we move all government to “default deny”, what I am suggesting is that Social Security be re-defined as welfare, not an entitlement. You aren’t making a contribution to your Social Security Fund, you are paying a tax so people who get wiped out can have a safety net. Remove the income cap on contributions, put 1%-2% of all pay into the Safety Net Fund (and make it an actual fund, not a Congressional Piggy Bank) and the give the option for the rest of the of the tax to either go to the fund, or to a 401K/IRA. If you opt for the government to manage your retirement, you can tap SS when you retire. If you opt to manage it yourself, you can only tap SS if you get wiped out

        Every program has free riders, and usually the cost of removing them all far outweighs the cost of ignoring all but the most obvious/egregious.Report

  7. Where, for starters, is the evidence?

    Cognitive biases, there are many possibilities for perverse consequences when making decisions, particularly long-term decisions concerning retirement savings. Some, like me, see huge downside risks leaving saving entirely in the hands of the individual. Others, like you, see the downside risks elsewhere.

    I sorta actually believe in the American people…

    I don’t think it is a matter of “belief” or disbelief in the American people. Additionally, it is not a matter of wisdom or foolishness, it is a matter of how we process information, how much we can process, how much time/attention we can dedicate to the task of processing, and the other boundaries to our rationality. I’d argue the government can (and should) systematically nudge us – and if proportionate, yes, coerce us – towards decisions that improve our well-being. Also, why isn’t electing representatives to make decisions of this sort a kind of “belief” in the American people?Report

    • Avatar MFarmer says:

      “Also, why isn’t electing representatives to make decisions of this sort a kind of “belief” in the American people?”

      Do you really not know? Of this sort? The sort where politicians “coerce us – towards decisions that improve our well-being”? Do you really not know?Report

      • Admittedly, “if proportionate” is doing a lot of work there. So is “well-being”, but I didn’t think it was the right place to launch into a giant Rawls lecture on primary goods.Report

      • Avatar E.C. Gach says:

        If people can be coerced by pols, then they really don’t deserve to rule themselves. It’s a sharp little catch 22.Report

        • Ok, so “government” there means a reasonably functioning liberal democracy like America, not China or North Korea. The elected American government – of the people, by the people, for the people – taxing (coercing) people such that they can have a certain quality of life in their retirement.

          The political science details are pretty interesting, but would make for a long, long comment.

          What happens when you ask a perennial grad student a question, you get thesis fragments: democracy, “a system of governance in which rulers are held accountable for their actions in the public realm by citizens, acting indirectly through the competition and cooperation of their elected representatives.”[1] Altogether, elected representatives need to respond to public demands and are subject to regular elections. This definition should be taken into account alongside Adam Przeworski’s definition of democracy as a system of institutionalized uncertainty. This system is neither chaos nor anarchy; uncertain does not mean anything is possible. Contestation is open to participation, conflicts are regularly suspended under established rules, outcomes are binding unless/until they are altered according to the rules (outcomes have a temporary nature). In sum, democracy is seen as a system of processing conflicts where outcomes depend on what participants do, no single force controls what occurs. The outcomes are uncertain from the point of view of the participants.[2]

          [1] Schmitter, Philippe et al, “What Democracy Is… and is Not” in Larry Diamond and Marc Plattner, the Global Resurgence of Democracy (Baltimore: the Johns Hopkins University Press, 1993), pp. 39-52

          [2] Przeworski, Adam Democracy and the Market (New York: New York University Press, 1991, Chapter 1Report

  8. Avatar Steve S. says:

    “a means-tested retirement program for the indigent, plus a disability insurance program. These two, if taken alone, would be humane, decent, relatively manageable welfare programs.”

    Which will be adequately funded and administered through time by all political players.

    Please. It’s blindingly obvious why Social Security has to be a broad-based entitlement. The indigent and disabled would be at the mercy of whoever runs the joint, the middle class at least wields some degree of political clout.

    “Social Security earns a really, really lousy rate of return.”

    But is safe and reliable and will remain so as long as the population is broadly invested in it. And everybody with income is completely free to invest as much of their take-home in riskier, higher-return, private sector investments as they want. In fact, the government even encourages them to do so with all sorts of tax-deferred retirement schemes. The notion that the government is taking hard-earned wages away from working people and stashing it in a “Ponzi scheme” is a red herring, what the government is actually doing is funding a bare-bones safety net and yet still encouraging private investment in retirement. Granted, in order to fund that private investment you might have to make due with the $180/month cell phone plan instead of the $250/month one, the $80 cable package instead of the $140 one, the $28,000 sedan instead of the $38,000 SUV, and even (gasp) have a couple of home-cooked meals a week, but I’m all about good old-fashioned values like frugality.Report

    • Avatar Jason Kuznicki says:

      Please. It’s blindingly obvious why Social Security has to be a broad-based entitlement. The indigent and disabled would be at the mercy of whoever runs the joint…

      But… that’s the American people! Or so I’m being assured elsewhere on the thread. Surely this counts as taking care of our own, and we should be happy about it, no?

      If not, then your logic here would apply all the more to the means-tested welfare programs. Even I don’t want to go that route.Report

      • Avatar Steve S. says:

        “your logic here would apply all the more to the means-tested welfare programs.”

        It would to some degree. There are differences. I, for instance, would never access, much less recoup, any money I put into a day-care entitlement. But everybody will grow old and die.

        We could argue various social programs on an individual basis — the route you don’t want to go — but Social Security is something apart. Barring premature death we’ll all reach the point where we simply can’t work, or at anything more demanding than Wal-Mart greeter. There aren’t any smart alternatives for these people like welfare-to-work or job retraining or similar, you simply have to make sure they have a little money. By structuring Social Security as it is you ensure that everybody has a basement, and because our larger economy is based on extracting every last penny of take-home income for expenditure on cell phones and fast food this basement is important for a great many people.Report

        • Not to be too nitpicky, but

          > Barring premature death we’ll all reach the point where
          > we simply can’t work

          That’s a pretty big bar, isn’t it? (Maybe it’s not, my cruel elde demographics aren’t up-to-date). IIRC, lots of people die before they *can’t* work, or soon enough to it that the difference is really on the margins.

          > The indigent and disabled would be at the mercy of
          > whoever runs the joint

          I think this is a fair point in your defense, though. Social programs that only affect the disadvantaged are the first programs in line at the butcher’s block here in California, they’re likely to get hammered to death, and a lot of people are going to get The Suck as a result. I see no reason to believe this won’t be replicated on a national stage.Report

          • Avatar Steve S. says:

            “That’s a pretty big bar, isn’t it?”

            Fair point. I tried to address it, probably inadequately, with a flip remark about Wal-Mart. Consider the bar lowered a bit.Report

      • Avatar Simon K says:

        I would apply this logic to all means tested programs. In general, programs for the poor are poor programs, because the people paying for them generally do not benefit from them and have an unrealistic conception of how they work. Means testing is a terrible idea – it leads to marginal tax rates close to or even exceding 100%, opens a political space for demagoguery, and opposes the kind of provident, sensible behaviour we’d actually like to promote.

        Far, far better to just scrap the entire welfare state – social security, TANF, section 8, unemployment, the whole thing – and just offer everyone a basic income guarantee that disappears at a consistent non-crazy rate as your regular income increases.Report

  9. Avatar Simon K says:

    A few randomly scattered points:

    1. The point of Mike’s point – to me at least – is that certain conservative intellectuals are shameless partisan hypocrites. It doesn’t bear especially on whether mandatory private retirement accounts or mandatory private health insurance are good ideas. Personally I don’t think the constitutionality of things is especially relevant to whether they’re good policy or not, and I don’t think the mandate is unconstitutional in any useful sense anyway, in that if it is technically unconstitutional as currently constructed it could easily be made constitutional and be exactly the same for all practical purposes.

    2. Is the rate of return of social security for someone on the median income ($45k per year) really that bad, given that its risk free? If you were to keep your retirement savings in money market accounts and buy an annuity at retirement with the money, would it work out much better? I suspect not, given that money market rates often fail to even cover inflation. Most people would probably choose to take more risk than that, but I’d be very reluctant to force people to take more risk that that.

    3. That said, I don’t find your unthinkable alternative to be unthinkable. It faces enormous political and logistical obstacles, but it seems perfectly reasonable to me. The biggest practical worry with private retirment saving is that most people aren’t terribly financially literate, and there are only too many people trying to take advantage of that – if you look at how most people allocate their 401k and IRA savings I suspect you’d find they were paying excessive fees and had an age-inappropriate risk profile.Report

    • Avatar Mike Schilling says:

      The point of Mike’s point – to me at least – is that certain conservative intellectuals are shameless partisan hypocrites.

      Sure, except that I don’t know how that “some” snuck in there.Report

  10. Avatar Francis says:

    Starting over:

    1. I apologize for my rudeness.
    2. The real disputes over SS are about values, not facts. Here are some facts not really in dispute:
    a) SS is not bloated. The admin. costs of SS are a fraction of what a privatized equivalent system would be.
    b) SS is not budget-busting. It deliberately ran up a huge surplus in order to cover the baby-boomers, with the intention that the general fund would repay that surplus over time. It’s not some shock that SS is going to be making demands on the general fund in the near future; that was the plan. And the insolvency date for SS is so far out into the future that very minor changes in productivity and/or immigration rates keep it solvent in perpetuity.
    c) SS is not a Ponzi scheme. First, it’s run by the government, so it can make its payments so long as the govt is willing to tax to cover them. Second, the time lag between when the payment is made and when the govt pays you back amply keeps the scheme from collapsing. Note that claiming SS is a Ponzi scheme is precisely the opposite of claiming it gives a lousy rate of return.
    d) SS does not have a lousy rate of return. There is not a single market offering that’s equivalent, so there is no price for SS. The better question is to ask what you mean by a lousy rate of return. In recent years most everybody has lost significant sums of money from their private retirement portfolio. SS has kept paying.
    e) SS is not charity. If you don’t pay in, you don’t get back.
    f) SS is not regressive. Due to the bend points in the calculation of various benefit payments, it pays the lower income qualifying persons a little better than the higher income qualifiers. Substantially raising the cap would, in order to keep SS looking like a pension and not a tax, also require substantially raising the benefit.

    Here are some legitimate values debates about SS:

    a) It teaches people to rely on the government. Response: yup, the basic liberal principle about government is that it can help people.
    b) SS is mandatory. Response: yup. At a societal level, people grossly underestimate what they need for savings. People are provably irrational over the long-term. Elder poverty used to be a huge issue. So, as a society we have decided to counter-act our irrationality with a mandate.
    c) People should be allowed to opt out. Response: Sorry, but we have too many whiners and too many legislators responsive to the needs of whiny constituents. If a large number of people were wiped out because their private system collapsed, they’d coming running to Uncle Sam and we couldn’t say no. See our responses to hurricanes. It’s the same issue with medical care; we don’t trust ourselves to let people who made bad choices suffer.
    d) A means-tested system to alleviate elder poverty would be better. Response: means-testing the elderly is really hard, because the elderly tend to have assets, not income. Medicaid used to require people to be utterly impoverished before it would cover them; that was considered so humiliating that the rules on asset possession have changed. Do you really want to be sending SS agents into elders’ houses and telling them they need to sell off the china and get reverse mortgages? Such a cruel program would soon get eliminated.

    At the end of the day, SS and the PPACA are fundamentally about the role of government in our lives. Those programs are based on the idea that our government represents the collective goals of we 300 million Americans that we share a common society. Individual charity is great, and to be commended, but hard problems like retirement and health care for all of us require a governmental solution.Report

    • Avatar Simon K says:

      You could structure an opt-out so that you could only opt-out of the income-dependent part above the bare minimum. This is how the UK national insurance system works – you can’t opt out of the basic state pension. The basic state pension is not at all generous and not income or contribution dependent, but at least theoretically its funded through the national insurance tax. You can opt out of SERPS – the state earnings related pension – and put the money into a suitably qualified IRA-like vehicle (it still comes off your paycheck – you can’t opt out of that part), which has to guarantee at least part of the principal ( I can’t remember how much).Report

    • Avatar North says:

      Francis I agree with several of these points and think it’s all thoughtfully written. Thanks a lot, I really appreciate it.Report

    • Avatar Jason Kuznicki says:

      Apology accepted.

      I still stand by a lot of what I said earlier, though.

      Bloat: SS has become vastly larger than it was intended at the inception. It’s large enough that even a modest fluctuation in it is huge by comparison to most other parts of the federal budget.

      Budget-busting: I’m aware of the surpluses in the recent past and currently. They won’t last forever, and big changes are ahead. Either higher taxes, fewer benefits, restricted access, or some combination of the three.

      Ponzi: It’s laughable to say that something isn’t a Ponzi scheme merely because it’s run by the government. I’m sorry, I just can’t even take that one seriously.

      Lousy rate of return: The only way someone would buy into a Ponzi scheme with a lousy rate of return would be if it were mandatory. Such is the case. An equal level of security — with a greater rate of return — can be had by buying treasury bills directly. It’s simply false that there is no market offering that compares to SS.

      Charity: Many aspects of it certainly are. The disability provisions are, and so is SCHIP, although the latter is a smallish part of the pie, I know. These seem to be justifiable on grounds other than the entitlement program for well-off folks. So let’s make those cases separately, which seems the more honest thing to do.

      Regressive: The taxes paid into it are. This is a complaint of liberals. I am merely repeating it. If the payroll tax were flat, I wouldn’t have a complaint here.

      As to the values, I find (a) contemptible, (b) doubtful, (c) bad policy, (d) easier than you think. Many welfare programs do means test on the basis of assets. If you want to help the poor, there is little other way to do it.

      Except possibly a guaranteed minimum income/negative income tax, which would be my first-best solution.Report

      • Avatar gregiank says:

        FWIW- I’m sure we will not come to an agreement on this.

        Calling SS a Ponzi scheme is ridiculous. A PS is a scam designed to rip people off by hiding the true nature of the deal. That is not in anyway the situation with SS. Every year we get reports on the status of SS. We can openly analyze the status of SS and choose from a variety of ways to keep in going. The difference between something that has its nature hidden and can not by its nature last with something whose every detail is open and has lasted for decades and is projected to pay full benefits even if we do nothing to around its 100th birthday is huge and qualitative.

        Ponzi scam is limbaugh level theatrics that requires a mega loose definition of Ponzi scam.Report

      • Avatar Francis says:

        True libertarians have to get comfortable being in the distant minority. But when you find a policy — social insurance/pensions — that exists in one form or another in every single industrial nation to be “contemptible”, then maybe it’s time to recalibrate your contempt meter?

        I mean, I agree that people as a group can be evil, meanspirited and just plain stupid. But I do try not to hold large majorities of the voting population of the industrialized world in contempt. Wisdom of crowds and that sort of thing; they might actually know something I don’t.Report

        • Avatar Jason Kuznicki says:

          True libertarians have to get comfortable being in the distant minority. But when you find a policy — social insurance/pensions — that exists in one form or another in every single industrial nation to be “contemptible”, then maybe it’s time to recalibrate your contempt meter?

          It’s not that I find the policy contemptible. Significant parts of it seem laudable to me, even. Others seem ill-advised and/or risky.

          What I find contemptible is the way that liberals cheer for increasing our dependence on the almighty state, even among people who don’t need to be dependent. This shouldn’t be counted a success story. It should be rather embarrassing, I would say.Report

          • Avatar Francis says:

            umm, what? Who’s cheering for increasing dependence on the state?

            SS is a societal response to the proven problem of inadequate savings. It was supposed to be supported by pensions and private savings. But I don’t see a lot of libertarians writing about employers needing to expand pension offerings. Which is odd. Who’s more likely to be a better investor, a professional pension manager or some guy, like me, picking 401(k) funds more or less at random?

            PPACA is a societal response to the proven problem of a failed market in health care financing.

            It appears that both these problems are near-universal, because every single industrialized country has adopted public programs addressing them.

            What’s the state for, if not addressing persistent problems that exist on a societal level? I’m not cheering for dependence on the state; I’m cheering for a state that can respond effectively to significant long-term problems.Report

  11. Avatar Mike Schilling says:

    some conservatives were tempted toward the paternalism so dear to the liberals

    I’m not sure whether you’re more or less cynical than I am, but I saw it as a big wet kiss to the financial types who would at best be earning fat commissions on all that forced savings (and at worst be making off with it in a way that would have made Bernie Madoff look like a guy that holds up 7-11’s.)Report

  12. Avatar Herb says:

    “Compelling someone to buy a product seems to be a problem in both cases, at least by my reading of the Constitution. ”

    Still under the impression that Obamacare is requiring you to buy a product, huh?Report

    • Avatar Jason Kuznicki says:

      If the individual mandate is okay by you, then are you also okay with being compelled to deposit your Social Security with private banks and investment firms?

      Constitutionally at least, I don’t see much difference here. Even many of the policy pitfalls seem the same to me — the risk of public/private collusion, undue corporate influence in government, the way both seem to turn individuals into serfs of corporations… The more I think about it, it’s honestly a puzzle to me how people so easily differentiate between the two.

      Perhaps our two-party system is really made up of the Party of Insurance Companies and the Party of Investment Firms. Forgive me for not finding either of them terribly appealing.Report

      • Avatar ThatPirateGuy says:

        Jason let us consider something more obviously ridiculous.

        A top-hat mandate. A law that required all people over the age of 26 to buy at least one top-hat that met government standards. This law would surely be less of a priority to deal with than drug prohibition, the militarization of police, gay marriage bans, the death of the 4th amendment, etc.

        I mean if I were able to offer you a country with a top-hat mandate but none of those issues would you even hesitate to accept(assume you knew I could deliver.) Surely you would be more free in that country than this one.Report

        • Avatar Jaybird says:

          I mean if I were able to offer you a country with a top-hat mandate but none of those issues would you even hesitate to accept(assume you knew I could deliver.) Surely you would be more free in that country than this one.

          Would it be fair to respond to this hypothetical by pointing out that there are plenty of countries with systems close enough to the systems you claim to want and if you really wanted to live in a country with those systems you’d move?

          If not, why not?Report

          • Avatar ThatPirateGuy says:

            Family, friends, etc.

            Perhaps we will move some day but for now we are here and frankly most of the bad things I mentioned are happening to other people not me.

            I’d still like them fixed. I’m tired of fighting with libertarians about economic issues. I’d much rather work with them on Balko issues.Report

            • Avatar Jaybird says:

              Oh, I know why you’re not going to move. Hey, it’s the same reason I’m not moving to Somalia. (All my stuff is here.)

              I’m wondering about the fairness of the question.Report

              • Avatar ThatPirateGuy says:

                I’m not asking anyone to move( not even to the booming galtian paradise of Somalia). I’m saying that the healthcare issue is at best a peripheral issue when it come to freedom.

                Any government can take everything from you not just one that provides everything.Report

      • (a) Add a public option
        (b) Remove the individual mandate
        (c) Set the public option cost at the amortized cost of your coverage from 18 to the end of life expectancy (revise periodically as necessary).
        (d) If someone subscribes to the public option after age 18, they pay the adjusted amortized cost (so you can’t skip out: you pay the full cost regardless, and it’s a cheaper payment the earlier you opt-in).
        (e) If someone opts out of having insurance, and they need medical care and cannot afford private insurance, they are required to pay cash for services. If they are unable to pay cash, they can opt-in to the public option at the adjusted rate for their given age bracket. If they cannot afford the adjusted payment, the government picks up the tab, adds the bill to a tax liability.

        Would this be acceptable? We can argue about whether or not it is workable 🙂Report

      • Avatar Herb says:

        If I were to object to either policy, I would not do so on constitutional grounds.

        Also, I think you’re comparing apples to oranges here. Despite the constant protestations to the contrary, the individual mandate doesn’t require you to “purchase a product” from a “private institution.” It requires you to maintain a “minimum level of health coverage” and then outlines the many ways you can do that, the first option being a “government-sponsored plan.”

        You’re not being compelled to do anything but “maintain a minimum level of health coverage.” How does that square with your SS hypothetical, in which you’re not only compelled to contribute, but also told where to put it?Report

  13. Avatar Chris_H says:

    “Compelling someone to buy a product seems to be a problem in both cases, at least by my reading of the Constitution. There might be some finesse that I’m missing here, but I doubt it. (Not that liberals are at all sincere in advocating this view, or even particularly interested in exploring how we might govern under it. But a fair point is a fair point.)”

    Liberals and conservatives don’t know much about the Commerce Clause, and attorneys know it’s been settled law (despite recent reservations from Justice Thomas).

    A bedrock case in Commerce Clause jurisprudence is Wickard v. Filburn:
    http://en.wikipedia.org/wiki/Wickard_v._Filburn

    The regulating of “not-buying something” is only half of the equation, and is the only thing conservatives discuss. The second half is “which has a huge, cumulative effect on a particular market.” In Filburn, it was production quotas for one particular guy growing wheat — the Court ruled that he couldn’t use it himself, because it everyone defied the law, it’d screw up the market. This idea was upheld recently in Gonzales v. Raich too, which held that Congress can regulate something that isn’t a commercial transaction if the failure to regulate it would mess up that market. And the “slippery slope” stuff’s been covered well elsewhere — http://balkin.blogspot.com/2011/01/health-care-reform-broccoli-objection.html

    So, this is an easy case: I don’t buy insurance and I go to the ER. That messes up everyone’s premiums. Therefore, instead of paying later when it’s expensive, we’ll make the person take responsibility for their health and pay upfront. Better that person paying than everyone else when it’s more expensive and catastrophic. Conservatives have long-argued this is the best way to go on HCR, framing it as a matter of personal responsibility. Liberals always thought this was a messed-up way to keep insurers in the game. Now that Obama’s adopted a conservative policy put forth previously by folks like Bob Dole and Mitt Romney, Republicans are freaking the eff out.

    It really shows that ideology and partisanship are sometimes two very different things.Report

      • Avatar Chris_H says:

        Well I hope that refresher made you realize you’re totally wrong then. Policy aside (I’m not a huge fan of the mandate, either), it’s pretty clear that, at the least, it’s got some support in the case law. Acting like those arguments are totally ridiculous is not correct.

        But then again, stuff like describing SS as an “inefficient middle-class entitlement Ponzi scheme” doesn’t really spur reasonable policy-talk, it just gets trollish commenters to come out of the woodwork. Mission accomplished, I guess.Report

        • Avatar Jason Kuznicki says:

          Now I’m wondering if you actually watched the video.

          Something tells me you didn’t. Perhaps it’s the short time between my comment and yours.Report

          • Avatar Chris_H says:

            I didn’t see a video on that post — it must have been taken down or something? I did read what I could from the paper, and it’s the usual arguments based on the Commerce Clause. I had a class w/ Justice Thomas last Spring that focused a lot on the subject — I understand where you’re coming from.

            But I just all this focus on the CC is awfully convenient and not focused on precedents enough. Those precedents mean something (despite making heads explode); they’re a helpful check against fleeting ideological battles. And they appeal to past authority and slow change … which sounds conservative to me.

            I’m no fan of the mandate — I think something like this — http://www.prospect.org/cs/articles?article=averting_a_health_care_backlash would be better — but I think that *constitutional* arguments, while an effective battle-on-all-fronts type strategy for the GOP, isn’t the most productive or honest, especially when the mandate was originally the conservative answer to the liberal single-payer utopia.

            I mean, instead of Tea Partiers making a level-headed effort to team up with Ron Wyden-types to fix it, you have Michele Bachmann on TV making allusions to dictatorships and new-found dedication to attacking the Commerce Clause, only after Dems passed the conservatives’ former policy proposals. All the bad faith is a little hard to take sometimes, despite what super-awesome arguments Randy Barnett has suddenly discovered about the Commerce Clause.Report

            • Avatar Jason Kuznicki says:

              You’re right — the video has disappeared.

              I don’t know that it’s dishonest of me, or inconsistent of the Cato Institute as a whole, to be critical of the individual mandate. As I’ve explained, Cato experts were critical of the Massachusetts plan even when it was the darling only of the Republicans.

              As to what Randy Barnett has “suddenly discovered,” I wouldn’t put it that way. These are indeed new powers being asserted under the Commerce Clause. Perhaps the courts will agree that Congress has them; perhaps they won’t. But I can’t agree that Wickard settles the matter. It really isn’t that simple.Report

    • Avatar Jaybird says:

      A bedrock case in Commerce Clause jurisprudence is Wickard v. Filburn

      (head explodes)Report

    • Avatar Koz says:

      “Liberals and conservatives don’t know much about the Commerce Clause, and attorneys know it’s been settled law (despite recent reservations from Justice Thomas).”

      Yeah, I wonder if Chris is aware that District Judge Henry Hudson found the Obama health care plan unconstitutional for overreaching the federal government’s ability to regulate interstate commerce.Report

      • Avatar Chris_H says:

        Yep, aware of that. And it illustrates what I’m saying: this was settled stuff until the recent political uproar. Judges don’t decide law in a vacuum; of course some would be affected in their beliefs. I mean, it’s not like they’re umpires, calling balls and strikes, or something …

        Take the Second Amendment: it meant one thing until a huge effort was put forward to make it a constitutionally protected, individual right. I’m not arguing that’s right or wrong, just that the politics of the day can affect our constitutional law.

        And I’m just more hesitant to go mucking around with our constitutional law when it’d be more useful and intellectually honest (by the GOP, not necessarily by the relatively few conservatives who’ve been against the mandate from the beginning) to make the policy work better, rather than trying to argue our understanding of the commerce clause has really been something totally different than what most have thought all along.Report

        • Avatar DensityDuck says:

          ” I’m not arguing that’s right or wrong, just that the politics of the day can affect our constitutional law.”

          …and this isn’t a case of the politics of the day affecting constitutional law?

          You’re talking as though the interpretation of the Commerce Clause as a “Do Anything I Want To” Clause is something that everyone has agreed on for a long time, and now here’s these Republican idiots trying to screw everything up. That’s not the case.Report

          • Avatar Chris_H says:

            No, this is *definitely* a case of politics affecting how some approach interpreting the Commerce Clause, just as politics affected the change in 2nd Amendment interpretation. I’m not really arguing against the policy end-points for either: like I said, I’m not a huge fan of the mandate, and I’m generally a 2nd Amendment, individual liberties guy.

            I’m arguing against acting like the Constitution’s been sitting around for 200 years, waiting to tell us some eternal truths about the mandate because a) precedent should mean something and b) it seems like it’s not a super honest approach for some on the right, when they were for the mandate before they were against it.

            I’d rather debate policy, especially when a whole bunch on the left would gladly help tear down the mandate with Tea Partiers if there was an effort to do so. Policy’s designed to be changed and improved. I’m more reluctant to take every policy battle to the SC to argue con law. That seems more serious (and like I said, sorta questionable given the former support from the GOP). Our constitutional law should change slowly; our precedent should represent something more sacred — a representation of years and years of cumulative wisdom about the law.Report

            • Avatar Jaybird says:

              No, this is *definitely* a case of politics affecting how some approach interpreting the Commerce Clause

              Wait a while. Eventually it might become “settled law”.

              That’s what we do with Wickard.Report

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