Enemy of the Good

What is the purpose of Social Security? The best way to determine its purpose is to figure out why so many people continue to support the program and object to its elimination.

The stated purpose of Social Security is to provide retirement benefits to elderly Americans. But why do we need such a program? Why not simply let people choose for themselves how much they want to save for retirement? Clearly, the stated purpose is not enough to explain the phenomenon- there must be another reason.

The real purpose of Social Security is paternalism. Many people believe that the average American is too irresponsible to save for his own retirement. Of course, most people feel that they themselves are responsible enough to make their own investment decisions, but other people cannot be trusted.

Even if we accept the claim of paternalism and assume that (other) people are too irresponsible to save for their own retirement, this is still not enough to justify Social Security. Why should we force everyone to save, including both the responsible and the irresponsible? Why not eliminate payroll taxes and raise income taxes to pay for increased welfare for the elderly? Programs already exist for the indigent; why do we need an additional program like Social Security? (Incidentally, this argument applies to public schools as well: if the purpose of public schools is to provide education to everyone, even those who cannot afford it, why not simply provide additional welfare benefits to parents of school age children who cannot afford private school?)

Second, even if we assume that people are too irresponsible to save for their own retirement, and even if we assume that it is better to force everyone to save a portion of their income rather than simply address irresponsible choices through welfare, that still leaves us with one additional question: why should we be forced to save our money with the government and not with a retirement plan of our own choosing? Social Security has a dismal rate of return of 2.2 percent. By contrast, even if we take the worst 20-year-period for the stock market, from the years 1929 through 1948, which includes the stock market crash of '29 and the Great Depression, the stock market had a positive real rate of return of 3.36 percent.

The effort to privatize Social Security addresses this last concern. It takes as a given the fact that for the forseeable future, the government will continue to force people to save money for retirement. Many advocates of privatization do not like this fact, and would prefer a system where people could make their own savings decisions, but they realize that politics requires baby steps. It is simply impossible to go from the current state of affairs to an ideal state of affairs overnight. The first step towards complete retirement freedom is to stop forcing people to contribute to the government retirement program and instead give them the opportunity to save their money in private accounts. The government would still be forcing them to save, but with a bit more choice about where their money goes.

John T. Kennedy objects to this proposal. His primary criticism, directed at this piece in The American Spectator by Brooke Oberwetter, is that partial privatization blurs the principled libertarian objection to Social Security, which is that participation in the program is not voluntary. By objecting to Social Security as an unsustainable as a Ponzi Scheme, we are ignoring the more important objection: coercion.

I certainly sympathize with Kennedy's argument; I too object to being forced to save, even if I have the option of putting my money in a private account. But most people don't agree with Kennedy and me. Most people don't equate taxation with theft, or Social Security with coercion. It would be nice if this was the case, but unfortunately it is not. What is a libertarian to do?

One thing libertarians can do is convince people that libertarian principles are correct. Good luck. I don't mean to disparage this method--in fact, I try to do much of it myself--but it is a long term solution, and it will not work for everyone. Anyone who has ever debated politics for a significant amount of time with a significant number of people knows that certain people simply do not care for libertarian principles and there is not much anyone can do to change this fact.

Another solution is to take people's values as a given and go from there. You say that you don't believe people are responsible enough to save for their own retirement? Fine. But why would you support an unsustainable Ponzi Scheme? We could achieve your desired goal of coercing savings with a system of private retirement accounts. And perhaps, once people own their own accounts, they will be more comfortable with letting people choose how much to save on their own.

Of course, this will not fully satisfy many libertarians, but it is an improvement over the status quo. And it would bring us that much closer to complete privatization of Social Security. Without such baby steps, how else does Kennedy propose to reduce coercion?

Moreover, Kennedy is incorrect when he claims that the only principled libertarian objection to Social Security is coercion. Some libertarians do not base their libertarianism on the non-aggression principle. Instead, they consider themselves libertarians because they believe it produces attractive results. Consequentialist libertarians are no less principled than natural-rights libertarians. The two groups merely differ on which principles they believe are more important.

I'm not saying Kennedy and others shouldn't continue to criticize Social Security on natural rights grounds. But I see no reason why natural rights libertarians should be at odds with consequentialist libertarians, nor do I see why the perfect should be the enemy of the good. We are all on essentially the same side, and share the same goals, even if we have different ways of getting there.

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I think there's a serious

I think there's a serious question whether or not privatisation would end up with better results or not. The first problem is that restricting payments into FIFO part of the system leads to yearly deficits early. I haven't figured out whether the privatisation advocates are fessing up and telling people that the guaranteed benefits will have to be cut drastically and sooner for privatisation to remain solvent or not.

The second problem is that, as involved as the federal government is in securities already, pouring billions of dollars every year into the market through the sieve of the federal government is going to turn the securities industry into an arm of the state. It's akin to the argument that opponents of vouchers make about state money and private schools.

- Josh

Josh, Those are reasonable

Josh,

Those are reasonable criticisms and are worthy of debate. I would oppose any Social Security privatization plan that puts control of the private investment accounts into the hands of the state, just like I would oppose any school voucher plan that puts control of private schools into the hands of the state. I suspect that libertarians who tentatively support these reforms would agree.

But the possible problems you mentioned are no reason to reject these proposals tout court. Rather than work to design a reasonable policy proposal, too many libertarians reject any proposal that doesn't match perfectly with ideal libertarian principles, even if the proposed policy is an improvement over the status quo. That it what I was objecting to in this post.

Garet Garrett, in his essay

Garet Garrett, in his essay "The Revolution Was," proposed that the point of Social Security was to give Washington the role of "the great capitalist and enterpriser." That is, the diversion of retirement savings to the government's control was intended to give the government the power to direct national investment according to its priorities. That would deprive the private sector of the ability to foil Washington's plans for the economy by private action.

There's much to be said for this thesis, especially considering the general mindset of the men who ran the Roosevelt Administration.

Those are reasonable

Those are reasonable criticisms and are worthy of debate. I would oppose any Social Security privatization plan that puts control of the private investment accounts into the hands of the state, just like I would oppose any school voucher plan that puts control of private schools into the hands of the state. I suspect that libertarians who tentatively support these reforms would agree.

I'm not suggesting that this is what voucher-oriented libertarians are hoping to achieve. Far from it. I do think it's the natural side effect of giving state money to anything. Invariably, the state winds up running it, or at least regulating it so it's run as the governors desire. In this case, as heavily state-regulated as securities are, that's nothing compared to how much involvement the federal government would assert if taxpayer money started going into the market.

The rest of your response is noted and agreed with.

- Josh

For me, the primary reason

For me, the primary reason to support individual accounts, funded by individuals, is that a real asset is created, as opposed to the promise of the government to pay X amount. The former is real, transferable, and is property. The latter is none of those things, and can be changed at a legislature's whim.

That is one of the biggest problem with the SSA as it stands today- it redistributes income from black men to old white women, when you look at the demographics of who lives longest and gets the most from the system. And if you die before you start drawing benefits, your "contribution" is lost forever- your next of kin get a measly $200 or so and are told to scram.

Brad DeLong, no friend of liberty or individual anything, says that a system of forced saving (such as a private accounts version of SocSec) would alter the stock market/bond market, of course, by inflating asset prices (boosting demand), which would tend to depress or perhaps eliminate the risk premium that current investors enjoy (if they invest wisely). On the other hand, he admits that it is corporations that pay the risk premium when seeking investment funds, and so a highly increased savings rate would make investment cheaper (as well as make start-ups cheaper) and thus, perhaps, spur economic growth.

Increasing the savings rate would be a boon to the economy, and unlike credit-induced boons, this would be based on real savings rather than wishes and thin air.

Micha, What I object to is

Micha,

What I object to is identifying the problem as anything other than what it is: state coercion.

What good is a locker room pep talk to voters and their representatives if they have no clue where the goal line is and you fail to bring it to their attention?

And what would your principled liberterian objection to a non-coercive Social Security be?

If people were voluntarily participating in a known Ponzi Scheme would you argue they must be stopped because it leads to bad results? If you did think it should be stopped what would you think of a remedy which entailed forcing people to pay into the scheme so you could "transition" participants out of it?

"Another solution is to take

"Another solution is to take people's values as a given and go from there. You say that you don't believe people are responsible enough to save for their own retirement? Fine. But why would you support an unsustainable Ponzi Scheme? We could achieve your desired goal of coercing savings with a system of private retirement accounts."

This is precisely where your moral subjectivism is going to get you a world of hurt.

Suppose these people are egalitarians who value equality of outcomes for individuals. Take those values as a give and try going from there.

And as a moral subjectivist (or relativist) what objection could you raise to those values? That everyone would end up worse off? No, taking their values as a given everyone is better off equally poor.

JTK, What good is a locker

JTK,

What good is a locker room pep talk to voters and their representatives if they have no clue where the goal line is and you fail to bring it to their attention?

I don't have any objection with telling people where the goal line is, although it may not always be politically wise to do so. By moving us incrementally closer to the goal line, we make it that much easier to eventually reach it. The statists know this well: they didn't take over the economy in one day; they implemented programs that would gradually expand.

And what would your principled liberterian objection to a non-coercive Social Security be?

You've read Machinery of Freedom, correct? Reread chapter 42: Where I Stand. The principled consequentialist argument against non-coercive Social Security is that it does not produce attractive results: it is unsustainable, it gives a poor return compared to the market, people do not have a legal claim on their savings and cannot bequeath it as they please, etc. All the same objections which apply to coercive Social Security. In both cases, a consequentialist libertarian would try to convince people that it is not in their best interests to support such a program, coercive or not.

If people were voluntarily participating in a known Ponzi Scheme would you argue they must be stopped because it leads to bad results?

I would certainly try to convince them that it is not in their best interests to participate.

If you did think it should be stopped what would you think of a remedy which entailed forcing people to pay into the scheme so you could "transition" participants out of it?

This analogy does not match the situation we are living in today. If we do nothing, new people will be forced to pay into the scheme anyway. The privatization proposal reduces the amount of coercion by at least giving people ownership of their own savings, and moves us closer to the point where Social Security could be fully privatized.

Suppose these people are egalitarians who value equality of outcomes for individuals. Take those values as a give and try going from there.

Very well, and we can show how the welfare state doesn't achieve the desired goal of equality. We can also ask whether their values really favor equality rather than just improving the wellbeing of the worst off (ala Rawls). Few people, despite what they may claim, favor equality over improving the wellbeing of the worst off.

"Very well, and we can show

"Very well, and we can show how the welfare state doesn't achieve the desired goal of equality."

And how would you advise them to get to that goal?

Or what moral objection could you raise to it?

"We can also ask whether their values really favor equality rather than just improving the wellbeing of the worst off (ala Rawls). Few people, despite what they may claim, favor equality over improving the wellbeing of the worst off."

You think so? Then try this thought experiment with your garden variety bleeding heart liberal:

If you could push a magic button that would make everyone twice as wealthy as they are now, would you do it? This doesn't mean they would have twice as much cash - they would have twice as much real wealth, each individual would have twice as much as he has now in terms of real goods. Make clear that this would also mean that the difference in real wealth between the richest and poorest would be doubled.

I've tried it. You'll find that many of them do value equality of outcome over improving the lot of the poorest: They won't push the button.

Why should they value improving the well being of the worst off over equailty of outcomes Micha?

JTK, Does this sound

JTK,

Does this sound familiar?

    Fortunately, human values vary a good deal less than one might suppose from reading political philosophers. Few egalitarians would prefer a society where everyone had a real income of $1,000 to one where incomes ranged from $90,000 to $100,000. Few Rawlsians would choose to improve the lot of the world?s worst-off person by one dollar at the cost of massively reducing the welfare of everyone else in the world. And few libertarians, however hard-core in theory, would choose a perfectly free society of desperate poverty over one slightly less free and very much wealthier. Almost everyone, in my experience, values most of the same things, although not with identical weights. It is easy for both libertarians and socialists to claim to support their principles whatever the consequences -- when each group believes the consequences would be, on very nearly all dimensions, the most attractive society the world has ever seen.

    If most people have at least roughly similar values, and if libertarians are correct about what sort of society libertarianism would produce, we need not justify our own values in order to argue for libertarianism. All we need do is to show that a libertarian society would be more attractive, by widely shared standards, than any alternative -- wealthier, wiser, freer, more just, better for poor as well as rich.

Micha, do you have an

Micha, do you have an objection to raise against an egalitarian preference for equality of outcome over individual rights, or not?

Are you simply denying that such preferences really exist?

I have no logical objection

I have no logical objection to an egalitarian preference for equality of outcome over individidual rights. How could I? That would be like having a logical objection to a preference for chocolate ice cream over vanilla ice cream. Preferences are outside the realm of logic, except insofar as a person may have multiple preferences which contradict each other other.

I do have a personal objection to egalitarianism. I also question whether people who claim to value equality of outcomes really prefer that over simply improving outcomes for the worst off.

I don't deny that such egalitarians exist. But I think they are few in number, and most who claim to be that kind of egalitarian are simply being obstinate and sticking to principle for principle's sake, just like many libertarians stick to natural rights principles for principles sake. I think few, if any people actually prefer principles over attractive results.

"What is a libertarian to

"What is a libertarian to do?"

Live without the state, Micha. I have never in my adult life "contributed" (a lovely bit of euphemasia, that) a single dime to social security, and I never will. And I am fully aware that this stand will very likely shorten my life. There might very well come a day beyond which I will probably not live if I am unable to sustain my life by my own efforts, because I have deliberately rejected the state's paternal claim on it. "Social security" is never ever going to take care of me (and this is beyond the near certainty that it's not going to take care of you, either -- even though you're being forced to "contribute") because I have deliberately and consciously rejected it.

"430-21-4093" -- That's the number that the state has assigned to me. Anyone can go ahead and use it, because I don't.

And more: it has made life very difficult for me. I don't have a dime saved anywhere: I carry my fortune around in my pocket. I'm sure you can figure out what that means.

Here is my satisfaction, however: my life is mine. What can you even imagine that is more important than that?

Whose life is the one that you're living? Is that even important to you?

That's for you to decide, of course, but I know this: on the last day of my life, I'm going to know who lived.

It's all well and good to

It's all well and good to decide that we'll accept half a loaf rather than none at all. But we must always be alert to the possibility that half a cure will be worse than none at all. And if we let our names get attached to that "half a cure" that makes things worse, we're toast.

Remember electricity "deregulation" in California? It wasn't really deregulation, and it turned out to be worse than the existing state-run system, and now deregulation has gotten a black eye because that monstrosity in California was allowed to bear the name "deregulation".

If the government gets to direct everyone's retirement investment, the result will be an even greater distortion of the investment market than you see today, to a degree that I think we'll be worse off overall than if we stuck with today's Social Security. That's not "baby steps", that's two steps back and no steps forward.