Wednesday, December 22, 2004

 

My Social Security Reforms

The other day I was speaking with some coworkers about Social Security reform. As everyone would expect, I am for extreme reform and yes I would like to see some privitization. I may lose my Libertarian credentials on some of my other proposed changes though.

Clearly Social Security was designed to be insurance. It kicked in at an age that it just generally wasn't terribly realistic for large numbers of people to save for retirement beyond because they would be dying soon (and if you weren't dying soon it was likely that you didn't need the money because you were probably financially well off anyway). Clearly the retirement age needs to be increased...and I'm not talking one or two years here...I'm talking 70 minimum, maybe 75. I say this knowing full well that it is unlikely that I would ever pull out any money that I contribute (like I will now?). It has been said before by people better than me...but Social Security has become an entitlement program instead of an insurance program and that is a big part of the problem. Part of the reason it is viewed as an entitlement program though is because people pay into Social Security for their entire working life and they expect something back. That is why we at least need to engage in some privitization.

I would go a step further and just be honest. Social Security should be payed for out of the general income tax. Social Security isn't going to be paid for out of the social security tax anyway, so why even bother with it? It is a pay-as-you-go system and it is ridiculous that we try to make it seem different by assigning it to a different tax line. If we aren't going to get rid of the social security tax and admit we always intended for it to be payed out of the general account, then we at least need to get rid of the income cap on the social security tax (this is where I start to lose my libertarian supporters). While I toy with anarcho-capitalism and in many ways support it, realistically it just isn't going to happen and as such I am sometimes forced into arguing mini-capatalistic solutions. In any case, the income cap needs to go.

Finally, I propose even a little bit more meddling in the economy than I am normally willing to do. I would set up different brackets of collection on social security where different groups have different ages that they get to retire at. My biggest distinction would be that if you engage in x number of years of manual labor that is physically draining, you get to retire at a younger age than you do if you fail to spend that number of years in such a profession. Why? Well to begin with, if you engage in labor intensive work your body endures more strain and is likely to break down more quickly than service sector workers and information workers such as myself. As a result, even though I would have an earlier retirement age for them, it is not necessarily true (and one would hope we calculate it well enough that it definitely isn't true) that they would collect any more than workers who qualify at later ages. I think this is also important as a second-best solution. The current system already penalizing those who chose manual labor careers as they have the same retirement age as everyone else. This may artificially drive down the number of people willing to enter manual labor professions and thus increase their wages above a free-market equilibrium. I'm just spit-balling though so stop hitting your computer and telling me I didn't take into account point y. Anyway, ultimately if we are going to have a social security system, it should try to equalize the number of years it is paying out for different groups of individuals.

So ultimately...what is my solution to solve the social security problem?

1. Drastically increase the age that you can start withdrawing benefits.
2. Get rid of the Income cap.
3. Privatize a portion of social security.
4. Create retirement brackets.

Does anyone care about my proposal? No. Still, I throw it out there to give my friends on the left and the right something to yell at me for next time we speak.



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