Social InSecurity

The Lord of Truth sent me these stories on Social Security reform a week ago, but I've been slightly busy. They're both well worth the read.

John Tierney, one of the few people at the left-wing dishrag who's not a raging left-winger (as noted in South Park Conservatives) does a fair analysis of the system and its problems. Here's the money section...

Americans now feel entitled to spend nearly a third of their adult lives in retirement. Their jobs are less physically demanding than their parents' were, but they're retiring younger and typically start collecting Social Security by age 62. Most could keep working - fewer than 10 percent of people 65 to 75 are in poor health - but, like Bartleby the Scrivener, they prefer not to.

The problem isn't that Americans have gotten intrinsically lazier. They're just responding to a wonderfully intentioned system that in practice promotes greed and sloth. Social Security is widely thought of as a kumbaya program that unites Americans in caring for the elderly, but it actually creates ugly political battles among generations.

With the help of groups like AARP, the elderly have learned to fight for the right to retire earlier and get bigger benefits than the previous generation - all financed by making succeeding generations pay higher taxes than they ever did themselves.

The result is a system that burdens the young and creates perverse incentives for people to retire when they're still middle-aged. Once you've worked 35 years, more work often yields only a tiny increase in your benefits (sometimes none at all), but you still have to keep paying the onerous Social Security tax, which has more than doubled over the last half century.

If the elderly were willing to work longer, there would be lower taxes on everyone and fewer struggling young families. There would be more national wealth and tax revenue available to help the needy, including people no longer able to work as well as the many elderly below the poverty line because they get so little Social Security.

Getting that kind of system seems politically hopeless at the moment here, but it already exists in Chile. Its pension system has a stronger safety net for the older poor than America's (relative to each country's wages) and more incentives for people to work, because Chileans' contributions go directly into their own private accounts instead of a common pool like Social Security.

Once Chileans accumulate enough money in the account to finance a pension that pays at least half their salary (which is better than what the typical American gets from Social Security), they can start collecting the pension and still go on working. In fact, they have an extra incentive to go on working because they keep more of their paychecks: elderly Chileans, unlike Americans, are freed of the obligation to continue making pension contributions.

Hmmm. Private contributions. There's an idea I've never heard.

Of course, maybe you think raising taxes will solve the problem. Then, let me introduce you to my favorite libertarian think tank, the Cato Institute. By way of disclosure, I'm a contributor to Cato -- and FYI, the folks at Cato are about as independent-minded as anyone gets. They're fiscal conservatives who opposed the war in Iraq and rip Bush regularly for failing to wield his veto pen to rein in spending. Their word's pretty solid here.

The bottom line? It's time for a change. And it will come, no matter how much obstruction and scaremongering the Democrats try. The only question is when.