Comments on: Understanding the Bush Yglesias plan

By: dlw

dlw — Sat, 05 Feb 2005 04:09:32 +0000

Dave, you got it wrong. At issue is not capitalism, but rather the rules of the game of the mixed economy/polity will be. I think one could probably argue pretty consistently that permitting people to invest their money in the social security trust fund would tend to be “wealth-maximizing”. Yet, wealth-maximizing inherently ignores distributional issues. Poorer people are not going to benefit from having the stock-option as they will be inherently more risk-averse and have good reason to be risk-averse in such a manner.
The real issue is one of how property-rights or decision-making gets allocated. If one holds to the current allocation of property-rights where say-so over funds paid in social-security taxes are deferred then the BushAdmin’s plan is a loan. If one presupposes it is unjust/unfair to make people defer individual say-so then the BushAdmin will advocate personalism since it will hold that money is yours, yada, yada, yada…
The key issue is one of what should normatively be the def’n of rights. Josh and the BushAdmin are advocating for what they prefer.
dlw

By: dave munger

dave munger — Sat, 05 Feb 2005 04:00:17 +0000

I should say that my preferred approach would be to be honest about Social Security. Rather than a forced savings plan, just roll back the retirement age and let people make their own decisions about how to invest their money. I’d even be in favor of a cut in the payroll tax, preferably by making, say the first $10K of income exempt.

By: dave munger

dave munger — Sat, 05 Feb 2005 03:54:59 +0000

I’m in favor of capitalism; what I’m not in favor of is gambling with an insurance program. I can see some other ways of addressing the Social Security problem that might work, such as allowing the goverment to invest some of the trust fund in stocks. However, when individuals are allowed this type of control over their insurance assets, the result will be some portion of the population in poverty. If the economy goes poorly, we’ll have to bail a large number of these people out. If the money was all in one big pot, everyone could tighten their belts a bit and ride it out.

By: dlw

dlw — Fri, 04 Feb 2005 23:06:12 +0000

It is an issue if it means that the “benefits” from increased choice only go to those who are better off and can risk diverting money into a fund and we all end up paying for the insurance to cover those funds that are invested.
dlw

By: Balta

Balta — Fri, 04 Feb 2005 22:54:32 +0000

Yglesias has added a second post which (kinda) backs up his claim about how they're planning to default on the trust fund. I need to think through what my mind is saying before I type any more.

By: Joshua Claybourn

Joshua Claybourn — Fri, 04 Feb 2005 20:12:29 +0000

That is why a privatization isn’t likely to be seen as an equitable fix in many lower-income-types eyes.
Every proposal I’ve seen permits risk-averse citizens to stay with the current system. This is a choice. So that seems to be a non-issue.

By: dlw

dlw — Fri, 04 Feb 2005 20:11:06 +0000

No one likes being exposed to risk and the willingness to accept a lower return for less risk is stronger for those with less income in the first place.
That is why a privatization isn’t likely to be seen as an equitable fix in many lower-income-types eyes.
dlw