OpinionJournal.com: A Political Case for Social Security Reform

Individual accounts would protect retirees from the government interference.
BY GARY BECKER
Monday, February 21, 2005 12:01 a.m. EST

Republicans and Democrats are arguing passionately about the future of Social Security, and the argument, at its core, is about privatization. It is true, as some critics observe, that there is no magical gain in privatizing Social Security, since all systems have to provide incomes for retired persons. By that token, however, there's no gain in privatizing a government steel plant either, since steel still has to be produced, too. Yet there are very good reasons--with roots in political economy--to privatize steel. And as with steel (and the like), there are excellent reasons for a privatized individual-account Social Security system... the really strong arguments for privatization are that they reduce the role of government in determining retirement ages and incomes, and improve government accounting of revenues and spending obligations. All the other issues are really diversions, because neither advocates nor opponents of privatizing Social Security generally answer the most meaningful question: Is there as strong a political economy case for eliminating government management of the retirement industry as there is for eliminating its management of most other industries? My answer is "yes."

Nobelist Becker knows a thing or two about economics, but he and most other pundits are missing the blinkingly obvious reason why Social Security privitization is being opposed by the Gimme Generation and its bought-and-paid-for politicians.

Think about it: to whom does Social Security income matter most? Answer: To those for whom the measly monthly stipend represents most or all of their retirement income. These are people who by definition have failed to adequately save for retirement on their own. Is it any surprise they fear a system that puts matters into their own hands, even incrementally, even with cautious phase-in that exempts those dependent on the current system, even with redundant safety-nets to catch the unlucky or ill-prepared, and even with spectacularly successful examples from Galveston County to Peru?

Unfortunately it seems that the naysaying chorus of grabby grayhairs is being joined by younger folks, descendants of several generations of increasing (and increasingly reflexive) governmental dependency, and willfully blind to the economic facts of our national Ponzi scheme and its failed brethren abroad. Social Security reform will still happen eventually here--the current system is utterly unsustainable--but my hopes dim that we will see the first baby-steps towards an "ownership society" anytime soon.