Sunday, January 09, 2005

Losing the spin war on benefits?

I'm detecting a serious problem in the Social Security debate.

In discussing Social Security privatization, both the left and the right are tightly focusing on the fact that a strawman reform plan, CSSS plan 2, reduces benefits.

But there is little acknowledgement of two facts. First the analysis uses a grossly conservative assumption on investment returns in which private investment returns are "risk adjusted" to match the returns on Treasury Bills. Actual returns will surely be higher. Second, even assuming such low returns, the ratio of lifetime benefits to lifetime contributions is the same as if we do nothing.

In Votehunter, JustOneMinute blog notes that any plan perceived to cut future benefits will be an easy target for attacks from Democrats and even some Republicans.

Indeed. And if the debate ignores the fairness of the benefits to contributions ratios and the many other positive consequences of privatization, Social Security reform will die on the vine.

Browse around the Carpe Bonum archives for lots more on this.