Sunday, February 13, 2005

Social Security: The Socialist Theory

Flipping on the Weather Channel the first thing this morning I could see the wall of green moving with irresistible force towards Madison. The local forecast reads: chance of rain 90%. It looks more like chance of rain 100% but fortune tellers always like to give themselves an out. The problem with trying to predict the future is that it is impossible to be completely accurate. The best that can be done is to understand what has occurred in the past, measure what can be measured, apply principals as you believe them, and then guess.

Social Security will be destroyed under the guise of fixing it reads a prophetic declaration, and since the authors are Northwestern University History Professors I believe they have studied the past and reviewed the current numbers. The interesting parts are the principals that underlie their prophecy. On a side note, I am amused that the root word “profess” has multiple meanings, including both speaking with knowledge and speaking insincerely. I have always trusted professors to be knowledgeable.

Their treatise begins with a clear concise statement of the historical problem. “Social Security was established in 1935 above all to prevent the elderly from falling into dire poverty.” Poverty and old age is now and will always be an issue each generation of society must address. The debate going forward should not stray far from this fact. The world is very different from 1935 and it is disingenuous to take the position that the solution from two generations ago should not be evaluated for both efficiency and effectiveness. If you are looking to the past for knowledge, the past began an instant ago.

The professors next state a refreshingly strait forward explanation of the 1935 solution. “The underlying principles of Social Security are a kind of social contract that is both intergenerational and intragenerational. That is, those who are working pay the benefits of those who have retired; and those who have never done paid work (widowed homemakers and dependent children, for instance) receive benefits from those who have worked or still do.” I hope the Howard Dean democrats embrace this as their true belief.

If the democrats are honest about and proud of their values, they will make the same case against fundamental social security change as the professors. “More important, allowing the establishment of personal accounts with Social Security premiums would violate the intergenerational and intragenerational social contract on which Social Security was founded. This social contract stands for mutual support, while personal accounts represent a completely different idea: self-interest.” This sounds like the old socialist idea that the rights of society take precedence over the rights of the individual.

The advocates of progressive government in their hearts do not trust individual citizens to take responsibility for their own lives. In their belief system, a collection of individuals acting out of self interest to improve their individual prosperity in life does not have the cumulative effect of building a better society. America is over 100 years past the time when private wealth could be accumulated by the forced exploitation of others and since then individual self interest has lifted most Americans out of total abject poverty.

The hallmark characteristic of poverty is the absence of assets. The wealthy are rich because they own things and the poor are impoverished because they don’t. The existing social security system is based upon taking money earned by the young in exchange for a promise of future help if they get old. The program has worked to keep the problem of old age poverty in check, but it has done nothing to help the young build real assets. People escape poverty when they create and keep money and objects of real value from their labor. The current design blunts the effects of elderly poverty but does nothing to help younger individuals build enough wealth to ultimately avoid the poorhouse. We can do better.

It is proper that there is an ongoing debate about how a free society deals with both treatment and prevention of destitute old age. Policy wonk nuances such as means testing, asset allocation percentages and government guaranteed benefit levels will eventually be determined. The battle for the hearts of minds of the American public will be won when we elect a government that expects, enables, trains and trusts the majority of adults to be responsible for their own lives, and uses assistance only for those who truly need it.