Today I was reading what some others have to say about Social Security Reform.
Harvard's Robert Barro is against privatization but not for the normal reasons. He is opposed to anything that will make social security bigger (which is a very good point!).
A few quotes :
"The strongest points for personal accounts involve property rights and the freedom of choice. When people contribute to a personal account, property rights insulate benefits from future Congresses who can change the program as they wish. The rights also mean that, unlike the current program, the contributions are not a tax that discourages work. Personal
accounts also allow for differing preferences on which assets to hold, how much risk to take, and when to receive income. Forcing everyone into a one-size-fits-all plan is usually unwise."
* " From the perspective of the trust fund, returns look low because the fund's government bonds have paid less than stocks. But the premium on stocks is compensation for risk, as gauged by financial markets. Although the ability to hold stocks is a plus, there is no free lunch of assured higher returns."
* "An opposing myth is that the transition requires too much government borrowing. In fact, a debt-financed transition entails substitution of explicit liabilities (government bonds) for unfunded liabilities (future benefits in the present system). There are no substantial effects on interest rates, national saving, and the current-account imbalance."
*" A SERIOUS ANALYSIS STARTS with asking why we have Social Security. If we were not so used to it, we would find it odd for the government to collect money from young workers and give it to the old (mostly workers' parents). One rationale is that the government should help people who lack discipline to save for old age. I have never embraced this paternalistic view. It's true that society will inevitably provide welfare to the needy elderly. Knowing this, some people will save too little and rely on public support when old. Thus, there is reason to require workers to save for retirement. How much depends on what is viewed as a minimal standard of living....
Contributions that fund just the minimum cannot go into a meaningful personal account. People would opt for too much risk, knowing they would be bailed out if they fell short. Also, contributions that cover the minimum provide no individual return and, therefore, amount to a tax that discourages work."
* "Personal accounts have to supplement the minimum payout. But then why have a public program at all, rather than relying on individual choices on saving? I think there is no good reason to go beyond the minimum standard; that is why I view personal accounts as a mistake -- they enlarge a Social Security program that already promises too much."
Barro's Business Week Piece as PDF file
Over at Market Week, Thomas Saving (what a great name!) lays out some myths about social security and shows why something has to be done (for both SS and Medicare). I highly recommend reading it.
"People may have honest disagreements about the best way to move to a funded system (for example, whether we should have individual accounts or have government make the investments). But, there should be no disagreement about our need to move to a new system of finance as quickly as possible, and personal accounts is one way to do that, although not the only way."