A reader writes in to ask why I think Social Security privatizers are irredeemable slime rather than people who simply disagree with me. It’s a good question. And I think I have a good answer. I don’t think badly of everyone who supports privatization, but I do think poorly of those on the Bush Commission, because I think they’re dishonest. Here’s why.
The question of Social Security privatization isn’t really an arithmetic or computational problem; it’s an ideological one. And there’s a very good argument to be had over the ideological assumptions underlying each approach. That argument is essentially about the distribution of risks — how much it should be individualized, how much socialized; how much it’s every man and woman for him or herself, and how much there should be a basic bedrock allotment of guaranteed income in retirement for everyone.
That’s a good debate, one I personally feel very clear on, but not one in which I think my opponents are bad people. Again, though, the Bushite privatizers are obscuring the real questions involved and being dishonest on several counts. I’ll be talking more about this. But for the moment, let me mention a few key examples.
Honest proponents of privatization willingly acknowledge the massive transition costs which would be needed to go from the current pay-as-you-go system to one based on individual propertized accounts. Here’s why.
At the moment current workers’ payroll taxes go right to current beneficiaries. Under the privatized framework a big chunk of that money would go into their own individual accounts. So you’d basically have one generation where we’d have to pay twice — once to current beneficiaries and once into the private accounts of current workers.
The dollar figure for these transition costs vary. But one number you hear is $1 or $1.5 trillion.
That number sound familiar? It should. It’s right about the size of the Bush tax cut. Honest privatizers know that that much money would be needed in transition costs. Anti-privatizers like myself believe that money should be put into strengthening the trust fund by retiring government debt and so forth. One way or another that money was needed to preserve Social Security. But Bush spent it on a big tax cut which went disproportionately to the wealthiest Americans. I take this as a sign that Bush (or, perhaps better to say, Larry Lindsey — that’s him in the picture) really isn’t serious about saving Social Security — privatized or not. And just between you and me, I’m right.
So you have a situation in which the Bush administration has greatly imperiled Social Security through reckless fiscal policy. And now they say that it’s so imperiled that it needs to be privatized.
The second point is the Bush Commission’s unreasonably pessimistic assumptions about Social Security’s future solvency. In fact, these assumptions are not just unreasonable. For anyone with a solid grasp of the policy issues involved they are almost laughable — some of the particulars are covered in today’s Paul Krugman column. The reason for this kind of fear-mongering is obvious: it’s a way to gin up support for radical reforms. But it’s dishonest, very dishonest. And frankly shameful.
This doesn’t mean there are no problems with the current system. There are. We’ll talk about those next.