83 Cents on the Social Security Dollar? Where Do I Sign Up?

Alex Pollock has crafted a plan to un-screw Social Security so simple, straightforward, and obviously beneficial that there's a virtual guaruntee that Congress will never consider the measure. It begins with a sound statement of reality:

If a debt cannot be paid, it will not be paid—at least not paid in full.

Everyone who has ever declared bankruptcy or dealt with a credit counseling firm knows this to be true. There is a point where liabilities stretch beyond future earnings. We have either hit this point already or sailing in full-steam, damn-the-torpedoes mode towards it.

Here's the plan:

You could stay in Social Security as it is. Or you could elect to settle for 83 cents, paid in U.S. Treasury inflation-indexed bonds, which you would own outright. These bonds, with all future interest payments on them, would constitute true retirement savings, protected from inflation.⁶ In exchange, you would forego formula benefits equal to the value of the bonds you received divided by 0.83. You would have made up your own mind about the chances of such promised Social Security benefits actually being paid.

I'd take it in a New York minute. So would most people, and every time that happens, Uncle Sugar finds his liability decreased. The essence of trade: both sides benefit.

So what's to stop it from happening? The greed of politicians for control over the lives of its citizens; the hunger to be seen as the cornucopia from which all good things flow. Why, if people have their own assets, we don't need to save them from themselves! Then what the hell are we going to do?

The Generation Pay Gap

Over at Ace, Gabriel Malor speaks truth to power:

[T]he Baby Boomers and their predecessors wanted it this way and, as a result of the way they wanted it, the whole scheme is crashing down. That's on them.
It's not like the Social Security funding crisis just materialized yesterday. This has been on the radar for decades. This structural flaw -- and it is a structural flaw, integral to the whole scheme -- has been evident for a very long time. It didn't just happen, as if it were an uncontrollable, unpredictable, and unfathomable Act of God. You did this; you were there and have been in the best position to do something about it for decades. But the only question was how far you thought you could kick that can down the road. And the Usual Answer was: who the fuck cares, as long as it's until after I'm dead.

Social Security has turned the aged into the nations most powerfull lobby. No one denies this. But if in the New Broke Normal, we're prepared to tell public sector unions that they need to sacrifice along with the rest of us, then it's time to consider telling rich old farts that they too are fellow citizens with obligations and responsibilities to the rest of us. That they may have to delay their long-promised suckling at the federal teat.

I'm utterly bereft of sympathy on this point. They've been telling me for a decace plus that they might not be able to fully fund my retirement pay back the money they've been grifting from my paycheck. Maybe I'll get 75% back. And if they're saying that now, what are they going to start saying when I'm actually ready to retire?

Por espanol, marque el "Dos"...

And Another Traditional Pension Plan goes Kaput...

...this time it's IBM, who figures they can save $500 million a year by giving 401(k)'s to all their employees. Pretty soon, the only place in America that will have defined benefit pension plans is the U.S. Government. Too bad it isn't called that.

Observe the Following:

The Government tries to get Corporations to pay into their pension plans what they say they're going to pay into their pension plan. Result? Not only the corporation but the union resists. Apparently actually funding their pension plans will be bad for business, to such a degree that even the union foresees pain. Or, heaven forfend, the corporation might decide to ditch the thing and go with a "defined contribution" or 401(k) plan. Gee, why wouldn't the union want that?

If this goes on, you can look forward to a number of future news stories:

The collapse of the auto industry's pension plan, with accompanying scandal, and rousing of rabble against the "corporate America." Micheal Moore might make a triumphant return to form.

Blame transmitted somehow to our (slightly) more corporate-friendly party, the GOP, despite the fact that it's Republicans currently pushing to make GM pay what it should.

More and more pundits drawing the parallels between old-style pension plans and Social Security. I mean really, how can anyone argue that the current system is suited to survive?

For more information, consult The Essayist #6 and How Social Security Reform Got Borked.

How Social Security Reform got Borked

Reading Austin Bay's Notes From the Marine, I caught a comment that explained perfectly how the Left managed to kill reform -- spreading fear:

"Ownership Society" is code language for "We just made it even more legal and convenient for your employer to raid your pension plan, and we’re not bailing you out. In stead we’re bailing *them* out because they overspent, and despite raiding your pension, they’re still going under."

The commenter, one Josh Jasper, doesn't seem to pay any attention at all to the central premise of SocSec Reform, that "pension plans" inevitably become extra revenue streams, overspent and underfunded. Under privatization, your employer can't raid your pension plan, because there is no pension plan. Does anyone worry about getting their 401k's raided? Of course not, because the money's in an account in your name, and your employer has no rights to it, even though your employer contributes to it.

However, I do think that Glastris' critique (quoted in Austin's post) of the President's pitch has a degree of valitidy. In essence, the administration failed to come up with a convincing catchphrase to overcome the public's natural reticence to changing their benefits. If the Pres had made the connection between private SocSec accounts and the 401k's people already invest in, a lot of the fear might have been abated. Touting SocSec as a "National 401k" would have made people realize that they were trading in something inefficient and collapsing with a plan similar to something they already know and trust.

We should take up the cudgel again, as soon as we can. It isn't like the Dems have a counter-proposal, other than "raise taxes and cut benefits".


For further information, see The Essayist #6.

Stephen Moore on Social Security Resistants...

From the NYPost:

It is almost as if the Senate Democrats — and some feckless Republicans, too — have a hyper-allergic reaction to the notion of letting workers build up private wealth and personal ownership. A cynic might say that they are so wedded to preserving the welfare state that they want Americans to be dependent on government, even if it means they will be worse off financially.

Well, duh. The fewer money Uncle Sam has, the less powerful they are. What ruling class is anxious to see it's power diminished?

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."

And now back to Social Security...

Here's a lefty chap with a series of arguments against Social Security Reform. I have engaged him in his comments, out of curiosity as much as anything else, to see if his arguments are as cogent as I hope.

Incidentally, I find it funny that he claims that the Right knows all about "framing the issue," when I read the Weekly Standard a few issues ago in the beginnings of panic mode over the Dems opening salvo on Social Security. It seems that the other guy always has the better talk -- waving his big shiny demagoguery coin in front of the voters' eyes, mesmerizing them away from Your Truth.

Remember when our political battle cries were on the order of "Tippecanoe, and Tyler Too?"

Yeah, I don't either.