The Essayist #6: the Un-Sustainable

My great-grandfather was, in his elder days, what they used to call a "triple-dipper": he had Social Security, a U.S. Post Office Pension, and a State of New York pension. And by the time he died at the ripe old age of 88, he had collected from the system much more than he had ever contributed to it.

I remember that as I read about the U.S. Government taking over the pension plan of United Airlines (Hat Tip: Mickey Kaus).

The temptation to use this to blather fulsomely about Social Security is overpowering, but I should keep a few things in mind:

The airline industry is a money pit second only to the U.S. Government.

A private pension plan going belly-up is precisely the kind of thing that scare the cat food out of people who don't want Social Security messed with.

I am using way too many bullet-pointed lists.

Fortunately, I am armored by the fact that United is planning to shift into a 401k plan. You know, the kind that allows individuals to invest a portion of their income into private accounts and then uses the money to invest in stocks, bonds, and other securities, managed by people who do that for a living, and then holds the money there until the person retires? They estimate they would have to spend $200 million a year to do that, instead of the $9.8 billion they're currently short of.

Traditional pension plans are on the way out. They're un-sustainable, because a) they're too costly if run honestly and b)they're too easy to run dishonestly. Union pension plans were a common source of mob money, and the biggest problem with United's p.p. was that it was allowed to run underfunded for so long.

Those opposed to the President S.S. plan tend to act as though only a few tweaks will be needed to put the ship back on course. Raise taxes here, cut benefits here, and all will be well. They're not quite wrong, but wrong-headed. Trying to maintain Social Security as currently constituted is like trying to jury-rig the engine on a B-17 while supersonic jets whizz by. Sure, you might be able to keep the old beast in the air a bit longer, but are you sure you want to? Is it really worth the aggravation of the double whammy of making workers pay more to get less?

Plus, how long before we have to do this again? Are demographics really our friend on this one? Is this cut-output, raise-input a temporary measure against the harsh winter of Baby Boom retirement, or the beginning of a series of similar measures, until the U.S. Government has to start looking for Japanese bankers to bail out our old folks?

In economics, that which provides a return non-commensurate with investment is deemed wasteful. The costs provided with putting everyone's retirement through one central clearing-house makes such a system wasteful. And that which is wasteful, inevitably, must be discarded if the rest is to survive. Wasteful becomes Un-sustainable.

I don't expect many Democrats to agree with me on this. To their minds, the value of the central clearing-house is that it provides simplicity and accountability. But to mine, these are illusions. There's nothing simple about the machinery needed to run the place, and somehow those on the inside are gaming the system to suit their needs. In the end, all that's left is a monument, bearing the big letters "WE CARE."