In its relatively-brief history, Social Security has grown from a modified protein supplement to a full-fledged sacred cow, and the usual gang of Beltway bandits isn't about to slaughter the old heifer, lest they incur the wrath of our old friends at AARP. Senior citizens, after all, have no apparent qualms about turning out at the polls and turning out politicians who don't see things their way.
Undaunted, the Cato Institute, the major libertarian think-tank, which for years has called for turning this sacred cow into hamburger, has now introduced its own version of a grill. The new Cato page at www.socialsecurity.org features a Java applet which will enable John and Marsha Websurfer to calculate how much more money they'd supposedly have flowing in after retirement if Social Security were privatized and if things happen according to Cato's scenarios.
Obviously, no one can predict the future of market investments the first year of MBA study is spent largely on finding this out the hard way but it does seem hard to argue with a Dow Jones industrial average pushing 9,000. Opponents of privatization point out that bull markets don't last forever, which is true; that not everyone understands how markets work, which is likewise true; and that moving all these funds into conventional investments will make billions of dollars for Wall Street bigwigs, which is pretty much inevitable. That said, though, even the most enthusiastic supporter of the status quo admits that the program will at some point run out of money, at which the government will have to raise payroll taxes, cut benefits, or some combination of both.
Nothing as big as Social Security is going to change overnight, or even in a couple of years; any move toward privatization would have to be phased in over a generation or two. The last time I got paid, my payroll taxes came to $200, half paid by me, half by the boss. Diverting half of that to my 401(k) plan, and counting only half as many quarters worked for Social Security purposes from that day forward, strikes me as an eminently workable deal. For those who worry about the revenue loss, there is the ridiculous ceiling on annual payroll taxes, which benefits people who make a great deal more than I do, and which could easily (though probably not so easily politically) be removed. If I survive past 70 or so, I'd be drawing somewhat less from Social Security, doing my part to preserve the remains of the system, and quite a bit more from my own resources.
Not everyone, of course, has a 401(k) plan. Still, not having a formal pension plan does not relieve someone of the obligation of planning for the future. Workers younger than I (which lately is most of them) seem resigned to getting little or nothing from the Social Security system. Converting to a private system may be just what they're looking for. Pass the ketchup.
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Copyright © 1998 by Charles G. Hill