Stressing ownership

Sebastian Mallaby in the Washington Post argues that privatizing social security would “add[] to the stresses of the modern world,” and thus cannot be justified unless it “brings a serious economic payoff.” Privatizing social security would increase stress levels, says Mallaby, because determining where to invest one’s retirement money entails making tough choices and taking risks. Thus, Mallaby believes that many, perhaps even most, people would prefer to have the government handle their social security funds as it does now than to “agonize over health stocks vs. Asian bonds.” Under these circumstances, Mallaby concludes that the case for privatization stands or falls on economics, not the virtues of an “ownership society.”
I don’t think anyone disputes that the issue of social security reform is primarily an economic one. But Mallaby is too quick to dismiss the “ownership” dimension. Proposals for privatization usually limit the private account option to younger workers, and contemplate that only 5 to 10 percent of their money can be placed in such accounts. I suspect that, to younger workers, the opportunity to manage a small percentage of their social security money, thereby taking advantage of historically high rates of return, will be considerably less daunting, and more welcome, than Mallaby supposes.
Moreover, private accounts are only an option; workers would not be required to take their money out of the system and invest it on their own. No one will be compelled to endure unwelcome stress. Accordingly, Mallaby is wrong about the philosophical case for privatization. It does not “just assume that if the economics were neutral, people would be happier with private accounts than with a public program.” Instead, it assumes that, economics being neutral, happiness will be maximized if people have the right to seek higher returns, should they choose to do so.
HINDROCKET adds: I’ve always thought that the Social Security debate is weirdly attenuated. To me, the most basic point is that a person should OWN his or her retirement account, as I do mine, and as most upper-middle income Americans do. Social Security is a diabolically inadequate program: if you die, the “contributions” you’ve made to the system are forfeited, and your heirs are out of luck. Why? Anyone who saves money should be able to pass those savings on to his or her heirs. But for most people, the Social Security program sucks up the funds that he or she might have otherwise been able to save, and transfers them to the federal treasury. In that sense, the Social Security program creates an environment that is worse than we would have in the absence of any retirement program of any kind.
What is the alternative to Social Security? Saving for one’s own future, as opposed to supporting the currently retired generation with government checks. I personally am acquainted with few people who rely on Social Security for their own retirement. No member of Congress counts on Social Security for his or her own retirement.
The truth is that Social Security is an untenable, unsustainable program which, even at its best, fails to meet the most basic test of any retirement program: the recipients of Social Security are entirely dependent on the whim of the State. Congress can, at any moment, cut off all Social Security funding, and no one recognizes any property right in any “equity” built up by decades of contribution to the fraudulent Social Security “trust fund,” which does not contain any assets.
The Social Security program is, in essence, a fraud which never could have been adopted but for the widespread belief that each person who contributes money into the system has an “account” with his money in it. It would be best if it were phased out of existence as quickly as possible. Given the political realities, anyone under the age of 50 should be agitating to bail out of the sinking ship and obtain the right to save money, rather than relying on the whims of the political process.