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Friday, April 29, 2005

President Bush, Social Security, and Us

President Bush’s words on Social Security last night worked for me in the sense that I think he’s heading in the right direction. Of course, I don’t think he heads quite far enough, but it’s a good start.

The acknowledgement that the system needs to be means tested was surprising and gratifying, but didn’t go far enough. Social Security, outside of any private accounts that the government may or may not give us, is a welfare program, and it should be treated accordingly. Means testing for a welfare program should exclude anyone who is truly wealthy; there is a principle of fairness involved that makes me uncomfortable with this since even the wealthy have been asked to pay into a “retirement program.” The truth is, though, that the system needs to be modified to reflect the reality: there is no reserve of money to pay retirement benefits and any pay-go system is in reality a welfare program meant to save the least of us from impoverishment in old age.

The Donald Trumps of the world don’t need the monthly government handout that takes the form of a Social Security.

To move to that kind of a system, though, the government must provide private accounts--the portion of your taxes that you or you heirs are actually entitled to, that requires no means testing, and that funnels wealth from one generation to the next.

My biggest curiosity with the President’s proposal last night--short on specifics as speeches must be, it’s hard to consider it a full proposal--are about the numbers involved in keeping the promises that he makes. Everyone maintains at least their current level of benefits (although the indexing for increases is tied to inflation to slow the growth of payments) and the closer you get to the bottom of the economic food chain, the more of a bump you get in payouts. I’d like to see the numbers to back-up the plan.

Before you head over to Michelle Malkin’s site (the link is at the bottom of the post) to see how the left is misrepresenting what the President proposed last night, you might want to acquaint yourself with this bit of wisdom:

The principle of full reserves, indispensable to private insurance, is thoroughly inapplicable to social insurance because governmental insurance programs can never escape being on a “pay as you go” basis. Belief that the maintenance of full reserves will lighten the future costs is utterly without foundation. For while reserves in private insurance are assets because they represent investments in government bonds, private factories, stores, buildings and farms, governmental reserves invested in its own securities are liabilities. Whereas a private insurance company draws interest outside its own policy-holders which supplements its income, the government merely spends the funds as fast as they come and in return deposits only its own IOU notes. Even the interest it sets aside to the reserve account on its ledger consists merely of additional IOU notes.

That brilliant explanation of the futility of describing the Social Security collection as a lock box or as retirement insurance hasn’t lost its edge since the day it was published in January of 1939. Abraham Epstein wrote it for The New Republic (leave a comment with a request and I’ll be happy to forward the PDF) suggesting some of the changes that President Bush was pushing last night.

Fixing Social Security shouldn’t be a partisan issue; it should be a frank discussion about the shortfalls of the current system, a realization of what we can reasonably expect from the system, and then finding a series of solutions that protect current and soon-to-be retirees. The system is broken and has been from its inception; it was and is a flawed design.

Now, head over to Mrs. Malkin’s place to see how people like Josh Marshall and Atrios are fighting the fight against Social Security reform and against the long term economic health of the United States.

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