November 14, 2005

silhouette3.JPG From the desk of Jane Galt:

The perils of privatisation?

For a while now, left-wing pundits have been trying to fight social-security privatisation schemes by pointing out that the much-touted model for such schemes, the Chilean system, is having issues. Close to half the people in the country will not have adequate retirement income from the system.

That sounds bad for privatisation. But on closer examination, we find that the main reason that so many people will not get adequate retirement income from the systeme is that they are not putting any money into the system. Given that America is mostly a nation of employees, not a nation of small farmers and street vendors working for cash, this seems unlikely to be a big problem, particularly since--unlike in Chile--the self-employed here are required to contribute to Social Security, as I recall to my immense displeasure every April 15th, when I declare my freelance income.

And to the extent that this would be a problem for the American system, it already is a problem for the American system. There is a not-insignificant number of people who work for cash and don't save for retirement, and end up as wards of the community. Those people would not be made better off by a privatisation scheme, but they wouldn't be made worse off either.

Posted by Jane Galt at November 14, 2005 11:49 AM | TrackBack | Technorati inbound links
Comments

I'm sorry, but I thought the social security debate was over. Haven't we decided to just cut benefits when the trust fund runs out?

Posted by: Randy on November 14, 2005 12:52 PM

No, we decided to raise taxes on the kids we aren't having.

Posted by: shell on November 14, 2005 12:59 PM

No, they will just turn on the printing press while blaming the evil Bushies for not reforming the system back in 2005.

Posted by: Creech on November 14, 2005 02:13 PM

Absolutely right. It's also about responsibility. Do we force people to save, or not? The correct answer is not. Enough to make it an easier matter than it might otherwise have been.

At least there it's a real plan, not a pay as you go plan that inherently collapses under the weight of low birth rates and inmitigated retiree expectations.

Posted by: Zeuswood on November 14, 2005 04:10 PM

That would be "unmitigated," as in gall.

Posted by: Zeuswood on November 14, 2005 04:47 PM

We can always bring back the inheritance tax.

Posted by: Ron on November 14, 2005 11:37 PM

Social security is one of many problems that our government hasn't solved sufficiently. But blaming it solely on Bush is ridiculous. This has been a problem for years and many of the same incumbents have been in office in our Congress and have done nothing. Our public representatives need to be motivated by voters to fix the problems this nation faces, which is why VOID has my support. If you're interested in learning how to help force our representatives take responsibility for Social Security and other pressing problems this nation faces see www.VOIDnow.org.

Posted by: Stephanie on November 14, 2005 11:50 PM

Public choice theory says that entitlements will never be fixed. This means all you can do is pay as little in taxes as you can, sock your money away, and don't give a penny to anyone.

Posted by: AT on November 15, 2005 12:50 AM

Given that America is mostly a nation of employees, not a nation of small farmers and street vendors working for cash, this seems unlikely to be a big problem, particularly since--unlike in Chile--the self-employed here are required to contribute to Social Security...

Perhaps the next question is: Who were the architects of and advocates for the Chilean program and are they being let anywhere near the Bush reform proposals?

Posted by: JSinger on November 16, 2005 12:08 PM

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