[Paleopsych] WP: What's Behind It: A Bit Of Social Engineering In Disguise

[Premise Checker]

What's Behind It: A Bit Of Social Engineering In Disguise
http://www.washingtonpost.com/ac2/wp-dyn/A28191-2005Jan22?language=printer

[This is the best article I've read on Social Security. There is no CRISIS 
as such. Retirement age will simply get pushed upward to make ends meet. 
Robert Fogel, in _The Fourth Great Awakening_, calculated that half of the 
actuarial value of Social Security has already been taken away through 
increases in the retirement age.

[My understanding is that private investment generates returns of 7-8 
percent per year in real terms, before taxes, over the long haul. (My 
Federal pension gets 6-7% *after* taxes (my own calculations), making it 
much better. Only certain state and local governments can beat this.) 
Social Security returns much less, but I've never understood why, except 
the all-purpose explanation of government incompetence.

[I agree with the article about the social engineering, but it's a tad bit 
disingenuous: all government action has some social engineering 
consequences. Likewise, a Hayekian decision to call of the bureaucrats is 
itself an example of rationalistic planning. Or meta-planning.]

    Sunday, January 23, 2005; Page B02

    For Republicans, Social Security reform could be the kind of
    donnybrook that health care reform was for Democrats in 1994. The
    magnitude of the political risk is staggering. On Capitol Hill, many
    Republicans wonder if they are being led off a cliff. What does
    President Bush think he's doing?

    Well, he says, there's a Social Security crisis. "The crisis is now,"
    Bush said in December. But he must know this isn't true. Economically
    speaking, stabilizing Social Security's long-term finances is a task
    of only middling difficulty and importance. It requires no fundamental
    change in the program and need not be tackled right away. As for
    private Social Security accounts, they are -- again, economically
    speaking -- a solution in search of a problem.

    No, what Bush and the Republicans are focused on is not the economy,
    stupid. It is conservative social engineering on the grandest possible
    scale.

    When people talk about Social Security reform, they usually mean
    reforms, plural. They're usually linking two changes that are
    conceptually and mechanically distinct. Reform No. 1 would reduce the
    growth of benefits -- or raise payroll taxes -- to bring the program
    into long-term fiscal balance. Reform No. 2 would structurally revamp
    the program by creating private accounts: A portion of your Social
    Security payroll tax would go into an investment account with your
    name on it instead of going to the U.S. Treasury to finance the
    benefits of current retirees, as now happens.

    Congress can adopt one idea, both ideas or neither. Either, by itself,
    is politically difficult; doing both -- simultaneously cutting and
    restructuring the program -- is audacious. Yet that is what Bush seems
    likely to propose. Why take the chance? On close examination, the
    economic payoffs are unimpressive. The moral and political dividends
    are potentially another matter.

    Earlier this month, a White House aide named Peter H. Wehner, director
    of strategic initiatives, sent selected conservatives a memo making
    the case for changing Social Security. "We consider our Social
    Security reform not simply an economic challenge, but a moral goal and
    a moral good," he wrote. "If we succeed in reforming Social Security,
    it will rank as one of the most significant conservative governing
    achievements ever."

    The emphasis was revealing. The memo said little about long-term
    growth and other economic effects. It stressed moving "away from
    dependency on government and toward giving greater power and
    responsibility to individuals." At the libertarian Cato Institute,
    Michael Tanner, the director of a Project on Social Security Choice
    and a long-time proponent of privatization, makes the same case.
    "We're changing fundamentally the relationship of people to their
    government," he says. It would be "the biggest shift since the New
    Deal."

    Bingo. Once you cancel the zeros on both sides of the equation,
    neither creating private Social Security accounts nor ratcheting down
    the growth of future benefits would constitute an economic watershed.
    Republicans frame Social Security reform as a dollars-and-cents issue,
    but what they really hope to change is not the American economy but
    the American psyche.

    Conservatives used to speak derisively of liberal social engineering.
    Yet the attempt to create private Social Security accounts is
    essentially conservative social counter-engineering. Government should
    help provide for unforeseeable contingencies: tsunamis, unemployment,
    open-heart surgery. But if there is one event in all of life that is
    wholly foreseeable, it is the advent of old age. Why, then, shouldn't
    people save for their own vretirements, instead of relying on welfare
    from the government -- which is what Social Security, as currently
    constituted, really is?

    Tanner argues that people who own assets see their place in society in
    a new light. Private accounts, he says, would encourage a culture of
    saving and personal responsibility; they would discourage political
    class warfare; they may, he argues, improve work habits and even
    reduce crime and other social pathologies. Create private Social
    Security accounts, and millions of low-income Americans will be
    stockholders and bondholders. GOP activists look at the way portfolio
    investors vote and salivate at the prospect of millions more of them.

    Many conservatives believe that moral values played a key role in
    Bush's reelection. It may seem odd, then, that Bush's boldest
    post-election priority is not abortion or gay marriage or schools but
    Social Security. The key to the paradox is that Social Security reform
    is not, at bottom, an economic issue with moral overtones. It is a
    values issue with economic overtones.

    By Jonathan Rauch, a senior writer for National Journal magazine, in
    which a longer version of this article appeared.