Cobb: There Is No Crisis, But

January 28, 2005

There Is No Crisis, But

I am one of those who believes that Social Security is not in trouble and that it might be more trouble than it's worth to fix it. But I am not so sure that I am against the fundamental change in perception it would create if it were radically modified or even eliminated.

As a backgrounder for my personal perspective, I believe that American should accomodate itself to a broader cross-section of citizens. I think there is a certain strength that America loses for not having dealt with Third World conditions within its borders. Therefore I am a proponent of liberalizing immigration and a host of other reforms I call the Internal Empire. America's ego likes to say 'We are the World', but we're not, actually. We need to get more like it and prove the robustness of our multiethnic, multicultural, pluralism. That means American shantytowns, no minimum wage and a large internal Second World. The alternative, it seems to me is dissonance - which always feels like opposition...but let's not go there right now. My point, I think, is made in posts like this called Your Competition. I am very concerned about the strength of our character, we cannot afford to bourgie our way into oblivion which is what I take the rise of Paris Hilton and Nelly to mean.

As part and parcel of the kind of vigor I am wanting in the American psyche, is that discipline of saving one's own money. If I recall correctly, we were severly admonished during the Reagan administration that our personal savings rates were abyssmal, especially as compared to the Japanese, who were creating lovely curved cars like the Celica while we were still making crap like the Dodge Diplomat. I'm pretty clear on how increased personal savings can be a hedge against inflation, but I'm not exactly sure how it affects the bond market. And somewhere there is a link between the amount of money we owe other governments, deficit spending and trade balance and the amount of money we dole out as part of the government sponsored pension program that is Social Security.

I intend to find out what increased personal savings outside of a government controlled pension fund means with regard to our overall national economic health. I give this idea the benefit of the doubt, and I'll be checking out with cats like Kudlow & Luskin have to say at Social Security Choice.

So while I don't believe that we are headed for a cataclysm, and I don't necessarily believe that kicking Joe Sixpack to Wall Street's curb is a good idea, I do believe that there is some balance that can be struck that gives ordinary citizens more flexibility in planning their own retirement which leaves them economically smarter and richer.

Now I understand that this is part of a longstanding fight by Republicans against government entitlements, much of which is visionary and some of which is actually practical. You won't hear anyone say so, but it's true. If we rid the Feds of the responsibility for Social Security, that's one way to keep Congress from phony accounting with the SS Trust Fund. But it also does something rather excitingly dangerous, which is deplete the number of deductions the government takes out of our paychecks. The effect is that it makes whatever tax increase we may need somewhere in the future look that more horrendous. And what we know here in California is that the legislature will twist itself into knots and starve every agency and break the bank twice over before voting for a tax increase. It's tax anorexia, and we're losing muscle.

To the extent that there is a temptation to do funny accounting with Social Security funds, and I am a skeptic given the history of what we've done with Savings & Loans and other state funds (specifically Orange County), we need to thin that puppy down. To the extent that a reasonable reform, say putting 50% into the hands of the individual for investment, we need to check that possibility out.

It's fraught with danger, but there is no crisis.

Posted by mbowen at January 28, 2005 01:08 PM

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