Two of my favorite libertarian writers, Matt Welch and Nick Gillespie, have a new book out, The Declaration of Independents. As part of their promotional efforts, today they are having "Ask a Libertarian" day. People submit questions via their web site, email, or Twitter, and they crank out quick video answers.
I submitted one on Twitter, and they addressed it about halfway through the video here:
Here's the background story: Nevada Congressman Joe Heck recently said of the Social Security system, "This pyramid scheme isn't working." He has taken endless heat for this comment, and has been backpedaling like Lance Armstrong doing the Tour de France in reverse. He has also been staying away from the press (see here) and dodging the subject (see here).
But it is an undeniable fact that Social Security is a pyramid scheme, and it is failing--rapidly. We are in a weird political climate where a congressman accidentally blurts out an obvious truth, then feels obliged to deny and run away from it. Such political cowards deserve our scorn, and deserve to lose their elected positions. The first step to fixing the problem is to acknowledge that it exists. Anybody who can't do that should be run out of Congress on a rail.
Hence my question to Welch and Gillespie.
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5 comments:
Social Security is very sound... or would be, if the government didn't dip into it.
Social Security is NOT a pyramid scheme, and it is perfectly sound. Although I have no personal stake in the matter (being Australian), I'd be happy to have a debate with you about this point.
This is also your blog, and you can write (or not write) about whatever you choose.
I don't know how you can argue that Social Security is not a pyramid scheme. Current workers have their paychecks taxed and that money goes to retirees. When the system started, people began collecting right away, without having put much or anything in. The ratio of donors to beneficiaries is shrinking over time, and will shrink alarmingly in the near future as the baby boomers retire. What about that is NOT characteristic of a pyramid scheme?
As for whether the system is sound or failing, we could just ask the Social Security trustees.
"To determine the likely balance of the trust fund in the future, the Social Security trustees performed stochastic modeling, estimating the likelihood of various exhaustion dates under different assumptions. This modeling concluded that there is less than a 2.5 percent chance that the trust fund will continue to exist beyond 2048. Instead, the middle of the road estimate is that the trust fund is exhausted by 2036."
Source: http://reason.com/archives/2011/05/20/the-facts-about-social-securit
That doesn't seem "perfectly sound" to me.
For more on Social Security from the good folks at Reason, see:
http://reason.com/blog/2011/03/10/social-security-snoopy-snoopy
http://reason.com/archives/2009/08/03/so-long-surplus
http://reason.com/blog/2010/03/25/how-can-you-tell-when-an-imagi
Index of all of their articles on the subject is here:
http://reason.com/topics/social-security
from the Christian Science Monitor (hardly a bastion of liberal politics)
The Trustees of the Social Security system, in their report last spring, calculated that the system's income would be inadequate to pay the full benefits promised to seniors in 2042. By then, 35 years hence, many baby boomers will be gone. For those still living, the payroll revenues that provide the basic income for the system will be sufficient to pay 75 percent of promised benefits. The next generation of retirees will also get 75 percent – not zero, as so many of them believe because of the false talk about the system being "bankrupt." And unless the nation's productivity stalls for decades (Social Security benefits are linked to wage levels), that 75 percent will have a buying power perhaps 30 percent greater than the Social Security benefits received by seniors today.
An analysis of the Congressional Budget Office puts the shortfall – not bankruptcy – at 2046, a few years later, when the Social Security Trust Fund runs out of the Treasury bonds it has been stockpiling because current payroll revenues each year exceed benefits paid.
A professional actuary, David Langer in New York, sees a brighter picture. He figures Social Security's finances are actuarially sound and able to pay full benefits for the next 75 years.
Mr. Langer reaches his conclusion after examining a decade's worth of 75-year projections made by the trustees. He found that the most optimistic of the three annual projections has been most accurate. Those more cheerful predictions show Social Security completely sound, with even a small surplus at the end of 75 years. "There is no problem, actuarially," Langer says.
He blames conservatives and their think tanks – including the CATO Institute and Heritage Foundation – for a long "propaganda campaign" that has foisted on the public the idea that Social Security is in deep trouble. He also criticizes the media for accepting the gloomy view of these critics, many of whom advocate privatizing Social Security.
The Trustees' middle projection, which the Trustees see as most likely, indicates that Social Security's financial shortfall over 75 years amounts to $4.7 trillion. By comparison, the war in Iraq and Afghanistan is expected to cost at least $1 trillion and the Bush tax cuts another $1 trillion over time.
The shortfall in Medicare finances is far more serious: about $40 trillion.
Very fundamentally, there was a whole generation of people who withdrew from Social Security without putting very much, if any, in. Even if it's not a pyramid scheme, it's a domino scheme with someone at the end who has to put in more than they take out.
The program could probably continue forever if the population were expanding at the rate it did prior to the 1930's or in the 1950's. Or if people stopped living longer and longer.
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