Tuesday, March 15, 2005

Debating Social Security

I basically started this blog with two issues in the forefront of my mind. Social security reform and Walker's campaign for Governor. Seems I was a bit premature on both fronts. The campaing is still months away from really gearing up, and the president still hasn't proposed a discernable plan. However, when did having facts and figures ever stop a debate? We don't need Perotvian charts, we can speculate and assume all day long to argue our positions. Such a debate (it really is shaping up to be a pretty good one) is taking place over at Sanity in Mad City. It seems that, despite no plan being proposed, people are opposed to it (and people are in favor of it, the fools). This sums up the leftist position:

There is also some good stuff going on up on Capitol Hill, with Mr. Greenspan testifying before one of the thousands of committees (Special Committee on Aging to be specific). The gist, STOP SPENDING!

We need, in effect, to make the phantom "lock-boxes" around the trust fund real.
For a brief period in the late 1990s, a common commitment emerged to do just
that. But, regrettably, that commitment collapsed when it became apparent that,
in light of a less favorable economic environment, maintaining balance in the
budget excluding Social Security would require lower spending or higher taxes.
Last year, Social Security tax revenues plus interest exceeded benefits by
about $150 billion. If those funds had been removed from the unified budget and
"locked up" and Congress had not made any adjustments in the rest of the budget,
the unified budget deficit would have been $564 billion. A reasonable hypothesis
is that the Congress would, in fact, have responded by taking actions to pare
the deficit. In that case, the end result would have been lowered government
dissaving and correspondingly higher national saving. A simple reshuffling from
the unified accounts to the lock-boxes would not have, in itself, added to
government savings; but higher taxes or lower spending would have accomplished
that important objective.
The major attraction of personal or private
accounts is that they can be constructed to be truly segregated from the unified
budget and, therefore, are more likely to induce the federal government to take
those actions that would reduce public dissaving and raise national saving. But
it is important to recognize that many varieties of private accounts exist, with
significantly different economic consequences. Some types of accounts are
virtually indistinguishable from the current Social Security system, and the
Congress would be unlikely to view them as truly off-budget. Other types of
accounts actually do transfer funds into the private sector as unencumbered
private assets. The Congress is much more likely to view the transfer of funds
to these latter types of accounts as raising the deficit and would then react by
taking measures to lower it.

Nod to Social Security Choice.