Last week Cathy Young had a very well done article for Salon.Com arguing that at least one good reason for voting for Republican presidential candidate George W. Bush was his solid approach to Social Security reform. She has no illusions about Bush, hilariously noting that, “Of course it would be nice if Social Security privatization had a spokesman other than Bush; the man probably couldn’t make a convincing case for celebrating Mother’s Day, let alone privatizing retirement benefits,” but argues that compared to Al Gore’s “pernicious … handling of the issue” Bush is a solid alternative.
Now, I don’t plan on voting for Bush but Young’s dissection of Gore’s arguments are sound.
First, there is no Social Security trust fund. Look, by law when Social Security has a surplus the only thing it can do with that money is invest in government bonds. So Social Security buys a ton of government bonds, and the government takes the money and spends it. When Social Security wants that surplus it has to redeem the bonds. And guess where that money comes from? That’s right, out of our taxes. Gore recognizes this since his proposal calls for going one step further and paying Social Security recipients in part directly from general tax funds.
Second, Social Security isn’t a “sacred trust” (as I saw Gore call it recently). Rather it’s an investment opportunity that is so bad the government has to threaten people with jail if they don’t contribute. The return on Social Security is in the low single digits. You could probably get better terms from a loan shark.
Third, Social Security is largely an income transfer from the poor to the rich. Gore goes in front of Democratic audiences and says Bush will never be able to privatize Social Security for today’s young workers while simultaneously keeping its obligations to the elderly. But one of the problem is that Social Security transfers income to the elderly regardless of income. The wealthy retired person with an annual income of $100,000 gets the same Social Security benefit as the poorer retired person with an income of $18,000. And yet the idea of actually means testing Social Security benefits so they go to the elderly who truly need the benefit is anathema to Democrats. Apparently it breaks the sacred trust they have to tax the poor to subsidize the rich.
A system that combines privatization for younger workers while means testing benefits for recipients would go a long way to solving the problems with the poor performance of the SOcial Security system while simultaneously guaranteeing minimum income levels for the elderly poor.
(Which probably means it makes far too much sense to ever have a realistic chance of happening.)