Debating Social Security
It’s Tyler Cowen vs. John Irons at the Wall Street Journal on line. (WARNING: the WSJ to override the article with a new article, which means that the link will not take you to the social security debate)
[Cowen:] Social Security has two parts conceptually: a welfare system for old people, plus a regime of forced savings for the young. I would prefer that Social Security evolve into a system of welfare for the elderly, thereby allowing us to junk the forced savings aspect…
A better fiscal idea [than privatization] is to raise the retirement age, thereby keeping the system solvent. One of the original virtues of Social Security was its minimum administrative costs and its relatively “clean” fiscal nature. Let’s not lose these properties of the system simply to adopt a flawed version of the privatization vision.
[Irons:] Yes, Social Security is costly but it also has enormous benefits. Poverty among the elderly is significantly lower than it would be otherwise. According to the National Academy of Social Insurance and the Social Security Administration, “the poverty rate for persons over 65 was 8.5% in the year 2000. Without Social Security the poverty rate would have been 48.1%.” Even for those in the middle class, it provides a needed supplement to many who would find it extremely difficult to get along without any public support. It also insures the elderly from running out of their own personal savings.
Meanwhile, Alex Tabarrok chimes in,
for current and past retirees benefit increases, a growing economy and longer life expectancy made social security a real deal. It’s today’s workers and children for whom social security is a raw deal. Even if the system does not go bankrupt, current workers will receive a very poor return on their “investment.”
In refusing to cut benefits to current and soon-to-be retirees the costs of any reform are forced onto those people for whom the system is already a poor return. It would be fairer to spread the costs to all recipients especially to those who have benefited from social security the most.
Except that if you spread the cost over all future generations, we can prepare and save for it. If you reduce the size of grandma’s check, she’s hosed.
For Discussion. How well does the debate/blog format work in this context?