Social Security Privatization - Is it the only reform option?

I know I said I was getting a new soapbox, but I have to stay on this topic as it appears to be a big part of the President's second term agenda. Today I would like to address some issues that the AARP made as they were strongly opposing the idea of privatizing Social Security. According to them, the President's plan would do two things:

1. Damage the most successful government program in history
2. Abdicate on a promise made to future retirees

My answer to their first objection is that I think that any government program that promotes dependence on government is a failure at its core objective. Since Social Security is the most popular and politically invincible government program, it is the core of the welfare state. This means that Social Security is the most successful government program only if you believe that it is government's duty to provide for you. If you think that you have the responsibility to take care of yourself, then Social Security is the most disastrous of all government programs.

As to their second objection, no compassionate person wants to just cut Social Security without ensuring that promises that have been made will be promises kept. However, it is irresponsible to continue to make the promise to future generations by taking part of their paychecks each week when everyone, including the AARP, knows that at some point in the future the program becomes unsustainable. I believe that people who are currently paid out of Social Security and people who are somewhat near to retirement age, should have thier needs seriously considered as we discuss Social Security Reform. After all they have made choices with the knowledge that Social Security would be there for them.

However, when more people under the age of 35 believe in UFOs than expect Social Security to pay them retirement benefits, it is ludicrous to try and say that we have to ensure that Social Security can pay all future retirees. I for one, would rather opt out now, cut my losses on monies I have already paid it, get to keep and invest my future earning the way I see fit, rather than to continue to pay for something I will never be able use.

Privatize Social Security
In his 2004 Republican Convention Acceptance Speech, Bush laid out his goals for Social Security. He said, "We must strengthen Social Security by allowing younger workers to save some of their taxes in a personal account -- a nest egg you can call your own, and government can never take away." Since his re-election, plans have started to surface to reform Social Security.

• For instance, you have Senator Lindsey Graham of South Carolina who would allow for privatized accounts, but would also raise payroll taxes to pay for the transition costs. According Robert Novak's editorial, this is the plan we need to keep an eye on because it is the only one with a chance to succeed.
• Another popular bill is New Hampshire Senator John Sununu's bill. His is your basic, run-of-the mill privatizing plan with higher percentages one would be able to send to the private account and no way to pay transition costs.
• Here are a couple of articles by Thomas Sowell on privatizing Social Security:
• Article 1
• Article 2

Abolish Social Security
Of course, privatizing Social Security is not the only option, we could also abolish it. No one in congress dares mention that option for fear of losing their job. However, abolition is truly the best scenario for many reasons.

At its very core Social Security is based on an immoral philosophy that it is OK for government to use force to take money from one segment of the population to give to another segment of the population. However, rarely do you hear discussions about the morality of Social Security in Washington DC. Federal money is presumed to be owned by no one, and is, therefore nothing more than a common pool of cash to be handed out by government. Anyone who has a job, though, and sees the difference between their gross pay and their net pay quickly realizes that the money is not free - it does not come from some leprechaun sitting at the end of a rainbow. Rather, the money comes from individual Americans and is redistributed in two different ways.

First, Social Security blatantly takes money from workers and gives it to retirees. These retirees have no right (i.e., moral claim) to the money (i.e., they didn't work to earn it); rather, the program simply robs some people for the benefit of other people. Secondly, Social Security redistributes the responsibility for caring for the elderly from individuals and families to the state.

These two forms of redistribution generate results that one would should really expect. When one takes from workers, then there is less reward for labor, so there is less incentive to work (and less incentive to prepare for one's own retirement). This means that Social Security leaves workers less ready for retirement.

There are also moral overtones when one shifts the responsibility for the care of the elderly to the state. While I recognize the fact that caring for different generations within a family can be difficult and even unpleasant, the intergenerational ties that are formed during that process are among the most important sinews of community. I could go off a tangent here about how our modern day society has forgotten its elderly and thus has forgotten its history and its heritage. Those who have lived long lives acts a moral compasses to younger people ensuring that lessons learned in the past are not forgotten. Social Security weakens those social links and makes it very difficult for a family to offer better care for its more vulnerable members. Thus, by denying younger workers the ability to achieve a higher return throughout their working lives, Social Security actually leaves younger workers with less money to share with their parents and older relatives.

One can clearly see then that Social Security faces a dual crisis. On the practical side, it is going under. On the moral side, it is robbing Americans, weakening family ties, and destroying community bonds.

The main problems with privatization is the outrageous transition costs and the fact that privatization does not fix the moral problem associated with Social Security, just the budgetary ones. Privatizating the system sustains government's role in Americans' retirement. Politicians would still mandate savings, regulate plans, and otherwise intrude in the retirement system. This solution still avoids confronting the basic moral wrong of using force to ensure that existing taxpayers fund current retirees.

Most retirees believe that the government is obligated to them because they have paid into the system and need to get their return. Compassionate people understand why they feel that way and sympathize with them, but that doesn't justify the continuation of an immoral system.

Even though those currently receiving Social Security benefits were victimized by previous generations, is it morally justifiable for them to victimize succeeding generations of innocent people? In the conflict between current taxpayers and current retirees, do not those currently paying the bill have the stronger moral claim? Truthful answers to these questions suggest only one clear answer to what to do with Social Security.

The simplest and most just solution is the complete abolition of Social Security. Eliminate the bureaucracy, taxes, and benefits. Get rid of everything. Nothing should be left. And it should be done immediately, with no transition payments or anything else.

This is obviously a tough-minded, unsympathetic approach, but the moral, political, and economic crisis presented by Social Security calls for a tough solution. The protests would be overwhelming, but we need to look at the issue from the standpoint of three different groups - young workers, old workers, and retirees.

1. Young workers below a certain age, probably in their 40s, depending upon income level, would benefit the most from an immediate dismantling of Social Security. They would have no complaint, since they would see an immediate raise of 7.5% in their paychecks. Hopefully, their employers would give them the 7.5% of their salary that is budgeted for their position that their employer pays resulting in a net 15% wage increase. They would be able to invest this sudden raise and with 20+ years to see their investment substantially grow.
2. Workers older than the break-even point could still invest but would lose on net(i.e., they would have gotten more money from Social Security than they will by investing since they have lost the important time component needed in long-term investing).
3. Retirees, those currently relying on Social Security benefits, would lose the most (though some would actually have received far more than they and their employers had "contributed").

I, of course, am concerned with the latter two groups. It would be immoral not to have a plan to deal with them. So, how would they cope with the loss of income on which they had counted?

1. First, they could rely more on their children. Us younger people would be saving on taxes and earning a greater return, allowing us to fulfill our moral obligations to our parents. There will be a hurdle as it may take some effort to recreate that ethic in young people.
2. Secondly, private charities should take on a greater role where the financial needs are serious. When the government drops its 15% tax on people's incomes, it would free up money for charitable giving. Also, the 15% tax break would encourage economic growth that itself would yield more revenues available for charity in the future. I have faith in the American people that those elderly left in need would undoubtedly be considered a priority by many philanthropic organizations. I assure you that new charities with the sole purpose of assisting former Social Security recipients would spring up.
3. Finally, able-bodied seniors might choose to remain in or return to the workplace. Even today, some older Americans prefer to work, despite the financial disincentives created by Social Security (benefits are reduced as income is earned). They welcome not only their pay but also their interaction with others in the workplace, including young people.

Conclusion
Social Security is hailed by many in government and outside of government as the best and most successful government program. I'm not sure I like their measuring stick because I must wonder what could be worse and more evil than a program which:

• takes workers' money, making it harder for them to provide for themselves and their parents
• weakens family and community ties
• discourages work and saving
• makes people more dependent on government
• imposes enormous losses on workers in the name of security
• creates enormous doubts about its own survival
• risks potential intergenerational war as the system slides towards insolvency?

If this is what is considered a successful government program, then I have to wonder what people who think this way would consider to be signs of failure.

When Social Security was enacted in the United States in 1935 a mistake was made that everyone is paying for. Instead of trying to fix this monstrosity that is built on an evil foundation, we should just rid ourselves of it. Then, as Americans have done in the past, we should act compassionately and creatively (on a voluntary basis) to ensure that anyone who meets with adversity due to this extreme measure are provided for. Tinkering with Social Security is not enough. Privatization proposals which preserve a role for government, while offering a vast improvement over the current system, don't go far enough in righting the immoral, socialist nature of the program. The only completely right answer is the abolition of this evil system.