just procrastinating

Monday, November 15, 2004

Social Security
There's a lot of talk about Social Security reform in the news these days, and this article by Tyler Cowen got me thinking. I would say that I am for privatization if that would be better for me (me! me!) in the long run, but Tyler offers and interesting perspective:
Should we opt for forced savings?
First, how much can our government force people to save in the first place? You can make them lock up funds in an account, but they can respond by borrowing more on their credit cards, taking out a bigger mortgage, and in general investing less in their future. The net increase in savings will be much less than the mandated increase. And this will make it much harder to avoid the welfare aspect of social security.

When do the savers receive true property rights over the funds? Surely not at 65. They could then spend it all and apply for the dole. We are back to letting people starve or constructing a secondary safety net; the latter is almost certain to happen, although that was precisely what the forced saving scheme was trying to avoid. Alternatively, the government could regulate how much a person can spend from the lockbox each year (must it limit your borrowing too?). Imagine being on the verge of death and petitioning the government to spend down your account to meet your medical bills or make a large donation. The complications are not encouraging.
Ultimately Tyler opts for changing SS to be more of a welfare system for the elderly, without the forced savings component. Anyway, kind of interesting, if you care about that kind of thing.

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