This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
2/22/2005
Social Security
In the article Chairman Greenspan in the lion's den by Tom Curry it tells about how Alan Greenspan supported private investing as part of the social security program. I myself think this is a great idea. I want to be able to invest my money any way that I want for when I retire. We all know that one day we will have to retire and that we should start investing now in our youth so that we can have a good sized retirement fund. I think that Greenspan support of this is great, he is a great economic mind and this will probably put the nation at ease.
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2 comments:
Alan Greenspan's support will definitely help to bolster support for privatized Social Security, but it seems it will still remain a polarizing issue for a lot of the country. From the news exposure I have had reguarding this, I have been very disappointed by President Bush's inability to explain it well and emphasize the pros. It can be so painful to listen to that man speak sometimes. I agree with the key objectives in revising Social Security, but we need more Alan Greenspans stepping in to elaborate on the reasons why it would be a step in the right direction.
I don't know how to say this delicately: you all have good opinions about this, but they're not "complete". There are big issues here that are just not being mentioned.
First off, I am not a fan of social security. I am a fan of Alan Greenspan, and of private accounts. Having said that though, there are a bunch of moose in the room and no one is mentioning them.
1) Everyone can already save in a private account, but most don't. Why would it be different in the future - because the government is going to make them?
2) Most people who manage their own investments do a substandard job. Is anyone talking about mechanisms to help them do better if they're required to do something they stink at?
3) Do we really want the government (a very risk averse organization) involved in the equity side (the risk taking part) of our markets?
4) Social security is sustainable forever. Period. It can't go "out of business" (although we could shut it down if we wanted to). What will happen is that the checks will get smaller or the taxes will get larger. So far, only the latter has happened.
5) Of course you can do better investing on your own than relying on social security (even if you are a really crappy investor). The reason is that social security doesn't involve any investment. It isn't saying much to claim that you can beat that.
6) Social security is like a family, while retirement investment is like a business. In social security, thw workers support the non-workers, just as in a family. In retirement investment, you defer consumption today so that you can have more consumption in the future - just like a manager reinvesting profits in a firm. You wouldn't run a business like a family, or a family like a business. You probably wouldn't even compare them to each other in the first place. But the level of discussion we have in this country about social security is that it is a bad business (because it isn't run like one). That isn't a constructive argument. The problem with social security is that the fat and happy receivers of benefits have more political power than the workers who are paying in. None of the currently proposed reforms addresses that problem. All that they do is starve the class of receivers - and no one is thinking about how those people will respond through the political system. Let me make a suggestion: perhaps they'll institute laws for preferential treatment for investment of the new pension funds in golf courses, restaurants that serve early bird dinners, and cheap prescription drugs. How will people's retirement accounts fair then?
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