Privatize Social Security? updated Sat. Dec 18
Krugman thinks doing so would be Buying Into Failure, saying that “Privatization dissipates a large fraction of workers’ contributions on fees to investment companies,” and he tells us that Chileans spend 20% on management fees.
I don’t know a thing about Chile (for that you’d have to ask my cousin, who lives there) but I know a thing about the variety of investments in the USA. Here in the USA you might spend 20% or more if you go through some Mutual Funds, but you can look up the Forbes list of funds and find no-load funds with much lower transaction costs. The Husband tells me that at Schwab, purchasing stocks costs $29 per transaction for US companies, and at Wachovia, 2.25%. Buying Treasuries is even cheaper, and those are the most secure financial investments. You can participate in the TIPS auction for free, and Series I savings bonds are also very inexpensive to purchase. In view of Krugman’s ignorance, it’s hardly surprising that he sees Social Security as “stupidity insurance”. Todd Zywicki at the Volokh Conspiracy answers the question Is Social Security Stupidity Insurance?,
Thus, the program is in fact designed to have some redistributionist, or perhaps more accurately stated, “equalizing” component to it.
This might also provide an argument for why we are concerned about people frittering away some of their SS on bad investments. If you invest the bit of your money that would otherwise go in SS in a bad investment, that may mean that you have to work an extra couple of years before you retire. If we think that people have an entitlement to retire at the age specified by SS, then perhaps this is contrary to the purpose of SS. I personally don’t find the argument to be all that persuasive, but it strikes me that a persuasive argument against Social Security reform must be grounded in the actual purpose of the program, rather than overwrought and unrealistic concerns about starving old people.
already having taken on the issue of riskiness. But then, Krugman believes Social Security is a “retirement system that works”, and that people would need someone else to decide for them.
Krugman mentions the Cato Institute’s Project on Social Security Choice, and I invite all visitors to read their website. Also don’t miss Eric’s round-up at Vikingpundit. Learning is the only insurance against stupidity.
December 18 update Kathleen lets it rip,
I fully understand what it means to invest in the stock market: it’s about as chancy as placing your all your chips on the spin of a roulette wheel. The difference between that spin and Social Security is that I at least have a chance at a return on my investment with the roulette wheel, whereas with Social Security, I know I’m not going to ever see dime one. I’d rather take my chances with the stock market, and as it’s my money, and not the government’s, I fail to see where they get off denying me the opportunity to do just that. Moreover, that they would deny me this opportunity because the faulty house of cards they’ve built would collapse if privatization were ever to come to pass is insulting. They’re covering their asses with my retirement money and that pisses me off more than Kinsley will ever know.
If Social Security were investigated by the SEC, it would be shut down in a New York Minute. I fail to see why I should be legally required to keep throwing my money into a failed system. It does no one any good in the long run to keep blathering on about the worthiness of a “social contract,” when the real issue at hand is the breach of the current social contract by blatant mismanagement.