One of the key agenda items of the Republican party has been privatization of Social Security. Whether couched in terms of worries about the presumably inevitable bankruptcy of the system or concerns about ensuring that tomorrow's workers are not too burdened with supporting retirees, the argument has been that privatization is the cure.
In reality, privatization of Social Security is a new disease that nobody needs.
First, bankruptcy is not inevitable for the system, even as currently configured. It all depends on much that happens in our economy over the next few decades and on whether responsible tax policy finally is able to take the stage away from the Reaganomics ideas of tax cuts for the rich coupled with enormous military spending buildups. If Congress would stop treating the payroll taxes as a backdoor way to get revenues while cutting the taxes owed by the wealthiest people in the country, we could do much more. The "payroll" taxes should be charged against capital income, for example, and the caps should be removed.
Second, the elderly are already working many years beyond the retirement norm accepted not so long ago, and odds are they will continue to do so. That means the worker ratio will not fall as sharply as the baby boomer retirement age anniversaries would suggest. If capital income is used as well as labor income to fund the retirement and health care safety nets, the worry about the falling worker to retiree ratio should vanish entirely.
Third, there are many reasons for maintaining a publicly funded and managed social safety net other than just the "return on investment" that might be expected from the revenues collected for that purpose. There's a very good, short letter on The Economists' Voice from Max Skidmore on this topic, in response to an earlier article by Konstantin Magin urging liberals to go against the grain and support Social Security privatization. As Skidmore notes, even though the high returns almost promised by Magin for privatization are not nearly so certain as Magin suggests, there are many other reasons for supporting a public social safety net than the comparative returns from privatization versus socialization. To name a few, Skidmore mentions the mildly redistributive effect (the more of that we can get these days the better), the support for non-retirees such as children and spouses, the ability of the benefits to keep pace with inflation, unlike privately purchased annuities, and similar benefits. His conclusion has got to be the right one--liberals most certainly should not support Social Security privatization.
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