Saturday, January 01, 2005

Pensions and the Ownership Society

As if we don't have enough to worry about with institutional pensions, now UPI reports this.

Unrealistically short life expectancy projections for U.S. residents are about to make Social Security's financial problems even worse.

'Life expectancy will make a very big difference in the fiscal viability of Social Security, but the agency's projections of longevity appear too conservative,' said demographer Samuel H. Preston of the University of Pennsylvania. "
I've often ranted to the people around me how I don't trust any pension system where I don't actually own and control the funds. Why not? Because there is not a single institutional pension system I can think of that is immune to people screwing around with pensioners money.


The point is: It is human nature for people to screw around with other people's money, especially when the amounts require nine zeroes or more. It doesn't matter if it is a government bureaucrat, a corporate hustler or a union thug. Any retirement money that is out of your control is...out of your control.

And now we have this business with life expectancy.

I had a conversation about Social Security privatization with a friend the other day. It was somewhat personal for him because he was thinking of his elderly mother. His position was that if his mother had direct access to her only retirement fund she would have blown it long ago and he would now be supporting her 100%. I don't know the lady, so I can't comment on her financial savvy. But it is a genuine concern for her son.

Robert Scheer puts it none too delicately in The GOP's sabotage of Social Security:

Apparently, my collecting Social Security checks for as long as I have left on this Earth is going to help bankrupt the economy and/or be an unbearable burden on young Americans.

That's why, after seven decades of unmitigated success in protecting seniors from the vagaries of market forces, the White House now wants to turn Social Security itself over to the vagaries of market forces. The conservative mantra, whether it comes to energy policy, war in Iraq or education, is to siphon public money into the private sector whenever and wherever possible, through such gimmicks as agribusiness subsidies, school vouchers and the hiring of private mercenaries.


Unfortunately, many on the Left like Scheer have chosen hyperbole over reasoned debate. Most Americans (IMHO) agree with the Left that Social Security should not be instantly terminated and the money thrown into ETrade accounts. But most also realize that a system that started with 42 workers per retiree in 1940 can not be sustained when there are only three workers per retiree now, dropping to two workers per retiree by 2050.

There are successful examples of pension privatization in unexpected places: Chile's pension plan aging well and Pension Reform in Sweden: Lessons for American Policymakers. There is a good editorial on this from the Wall Street Journal, but the link works for subscribers only.

What it comes down to is a basic difference in philosophy between the Left and the Right. The Left trusts institutions and governments to take care of the masses. The Right trusts individuals to take care of themselves.

The trick will be to make the new system as efficient as practical, and to make the transition as safe as practical. I hope there will be an inclusive debate about how to make it happen. But if the Left doesn't want to participate, the Right will just have to figure it out alone.


UPDATE: The Social Security debate has started in the blogosphere. On the left, Kevin Drum posted on this a few days ago. Atrios adds this and this. While MaxSpeak has this. There is not so much on the right so far, but Blogs for Bush weighs in here and here. And Frank J. contributes in his particular...idiom.