Wampum

Put This One To Rest, Please

Professor Bainbridge, of the UCLA law school, is one of my favorite bloggers on the right. Today, he has some questions for conservatives about private accounts:

So here's some questions for my fellow conservatives who support private accounts:

1.Would we achieve significant actuarial improvements in the health of the Social Security system by (a) changing the method by which the benefit is calculated from being based on wages to one based on prices (see Tyler Cowen's post for details) and (b) increasing the retirement age? Social security was designed for an era in which most folks would live to receive benefits for months rather than years. Why not deal with that problem directly? (Glenn Reynolds has a solution that goes somewhat in the other direction.)

2. If we can achieve significant savings and ensure the health of the system with the changes mentioned in # 1, is there a non-ideological reason for introducing private accounts? Even proponents of private accounts concede that the transition costs will require trillions of dollars of government borrowing. Do we conservatives really want revenge on FDR and the New Deal at that price? Personally, speaking as a small government fiscal conservative kind of guy, I'd give up personal accounts if any money thereby saved was spent on deficit reduction or, better yet, an income tax rate cut.

3.Why aren't conservatives talking about other entitlement programs, such as Medicare, which reportedly is scheduled to go broke long before Social Security does?

Some of those are good questions. I am not a conservative, so those questions are not addressed to me and I will not presume to answer them. I do think that there is one question that needs to be answered first.

Should conservatives get their facts straight before asking or answering questions about Social Security?

I refer, of course, to the premise that:

Social security was designed for an era in which most folks would live to receive benefits for months rather than years.

There are some myths that just will not die. If you step on a crack, it will not break your mother’s back. Al Gore did not claim to have invented the internet. George Bush did not list war, recession, and national emergency as exceptions to his 2000 campaign promise to maintain a budget surplus. Republican Presidents have not been good for the stock market or the economy. People qualifying for Social Security benefits in the early years of the system could expect, on average, to receive benefits for many years, not months.

The "months, not years" argument confuses life expectancy at birth with life expectancy at retirement age. Let’s go to the Social Security Administration FAQ’s for the definitive explanation:

If we look at life expectancy statistics from the 1930s we might naturally come to the conclusion that the Social Security program was designed in such a way that people would work for many years paying in taxes, but would not live long enough to collect benefits. Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women. But life expectancy at birth in the early decades of the 20th century was low due to high infant mortality, and someone who died as a child would never have worked and paid into Social Security. A more appropriate measure is probably life expectancy after attainment of adulthood.

As Table 1 shows, the majority of Americans who made it to adulthood could expect to live to 65, and those who did live to 65 could look forward to collecting benefits for many years into the future. So we can observe that for men, for example, almost 54% of the them could expect to live to age 65 if they survived to age 21, and men who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women).

Social Security was designed for an era in which men who reached retirement age could expect, on average, to collect benefits for more than 12 years. For women, it was closer to 15 years.

Can we please, please get that right? The Social Security debate is an important one. Everyone engaged in the debate needs to have the basic facts about Social Security straight.

Posted by Dwight Meredith at February 16, 2005 07:06 PM | TrackBack