The "Guarantee" of Social Security
I love the smell of anecdotal evidence in the evening. Courtesy of the Washington Post, in an article inflammatorily titled "Poorest Face Most Risk on Social Security":
Jim VandeHei - February 19th, 2005 No group of Americans would be affected more by President Bush's Social Security plan than those earning the least. Just ask 46-year-old Brent Allen.
Allen, who recently lost his job at a Massachusetts paper mill, faces a retirement financed exclusively by the money he has been paying into the Social Security system for the better part of 30 years. Like nearly half the U.S. population, he has no pension or savings to speak of. And his brief flirtations with the stock market have largely flopped.
Wow, VandeHei actually managed to find someone who's lost money in the stock market. I guess the whole thing's just a big game of roulette, then!
Jim VandeHei - February 19th, 2005 So Allen, who lives on less than $15,000 a year in disability payments from Social Security and income from his live-in girlfriend, is distrustful of Bush's plan to allow workers to divert a portion of their payroll taxes into personal investment accounts.
"I have had stocks, and have had them for six years, and I have lost money continually," Allen said this week. "What's going to happen to people when they retire when the market is down? There is no guarantee [Bush] can make. There is a guarantee now," under the current system.
Why can't Bush make a guarantee? What cosmic force will stop Bush and/or Congress from instituting various triggers to safeguard private accounts from such short-term fluctuations? Is there any particular reason they can't shift the investments in people's private accounts from stocks to treasury bills and the like as the individual reaches retirement age?
The fact of the matter is that the government is making "guarantees" to everyone paying into the system right now, even though we've established that it cannot pay them all what they're scheduled to receive as things currently stand. If the bankruptcy date of 2042 and my incredibly simplistic calculations are both correct, this "guarantee" will not currently hold for anyone under 28 years of age.
In other words, the only difference between our "guaranteed" benefits and the benefits of private accounts is that the current system pretends to be a sure thing, when in reality neither is.
None of these counterarguments are even necessary, however, because the accounts are optional in most of their proposed incarnations. The Brent Allens of the world will be free to cling to an archaic system if they so choose.
More fisking of this article can be found courtesy of Power Line.
» February 19th, 2005
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