Social Security Myths
By Arnold Kling
My latest essay on Social Security says,
The transition cost myth is one of four Social Security misconceptions that I want to address here. The others are the misconception that Social Security is a pension, the misconception that the Baby Boom is the main problem with Social Security, and the misconception that Medicare is in worse shape than Social Security.
…One way to eliminate the “transition cost” to partial privatization would be to first undertake a transition to better accounting. If the government were to put future Social Security obligations on its balance sheet as debt, then the accounting would be accurate. To borrow a locution from Warren Buffet, if promises to make Social Security payments are not a financial obligation of the government, then what are they? And if a financial obligation of the government is not debt, than what is it?
If unfunded liabilities to make future Social Security payments were counted as debt, then partial privatization would be nothing but a debt swap. The government would increase ordinary debt and reduce unfunded-liability debt by an equal amount. The transition cost would be zero.
Another recent post on Social Security is by Lancelot Finn.
People in the Soviet Union, Argentina and dozens of other countries worldwide have watched their governments have to break financially unsustainable promises. When the ground was washed out from under their feet, they had a long way to fall. Current trends suggest that will happen to us. If we want to stay afloat, we need to build the ship of Social Security private accounts and set out on the sea of the market.
UPDATE: See also this article by Phillip Longman.
For Discussion. Politically, raising the retirement age seems to be a sort of “third rail.” Actually, you can retire at any age you want. Should we instead be talking about the “dependency age,” meaning the age at which you become a government dependent?