Arnold’s post on Kotlikoff and Ferguson’s proposals for Social Security and health care reform reminds me of a short exchange I had with Kotlikoff in grad school. (I was a Ph.D. student at Princeton, and he was our guest speaker).

After he went over some proposals similar to the ones he advocates today, I asked him why he favored Social Security at all. Why not just get rid of it? He didn’t claim that people were too irrational to save for their own retirement. His only objection was one of credibility. There is no way to credibly commit to not help old people who failed to save for their retirement. So we either bail people out, or force them to save so we won’t have to.

In response, I pointed out that the U.S. didn’t have Social Security for most of its history, and it seemed perfectly credible. Furthermore, there is plenty of reason to think that without the Great Depression, we never would have adopted it. Roosevelt famously admitted that his goal was to lock Social Security in place during the golden opportunity of national emergency:

We put those
payroll contributions there so as to give the contributors a moral,
legal, and political right to collect their pensions and their
unemployment benefits. With those taxes in there, no damn
politican can ever scrap my social security program.

You could say that we would have adopted it eventually anyway, but I doubt it: The U.S. often enduringly deviates from the social democratic policies typical of Europe. Roosevelt sure didn’t see it as inevitable.

If I recall correctly, the conversation ended there. Today, I would be tempted to add a flippant conclusion: “If you really think there’s a credibility problem, I’ve got a perfect solution. Appoint me to be the Social Security czar. I assure you I won’t bail out a soul.” Think that’s cheap talk? Try me.