hard heads soft hearts
Saturday, July 27, 2002
excerpt from Andrew Tobias's book "My Vast Fortune", written in 1997 (I believe)
" `How Not To Fix Social Security'
The most frequently proposed Social Security reform - to gradually privatize the system, with people managing their own retirement accounts - has great surface appeal but big problems:
* while you're making the transition, one generation has to shoulder the nearly impossible burden of two systems - saving for themselves and providing benefits to today's older generations.
* what do you do if a person invests poorly? You'd still need a safety net.
* won't this leave an awful lot of unsophisticated people prey to slick pitches, high commissions, and transaction costs?
* But mainly (to my mind): why should everyone have to save - and live, once retired - as if he or she will last to age hundred and ten? Social Security is not just a pact between generations, though it is that, with each generation pledging to assist the previous one. It is also a pact among citizens of the same generation. We all pay in more or less equally (given equal incomes), knowing that those who die first will have wound up subsidizing those who outlive them. Yet this seems a reasonable deal, because it keeps us from all having to live like paupers at age sixty-five in case we have to stretch our funds to last thirty-five or forty years (So there's another reason we'd still need a taxpayer-financed safety net: would we allow ninety-two year olds whose cash has run out to freeze and starve?)
There's a reasonable case for going partway. With enough warning, you could eliminate benefits for those who don't need them and cut back somewhat on benefits even for those who do. The savings from this would be used to fund the individual investment accounts people are talking about. But why? Why take that extra step, in effect penalizing people who live longer than average, as tens of millions will?
After all, there's still lenty of variety in retirement lifestyles. It's not as if America becomes a homogenized, socialized society even with today's rather modest benefit levels. Some retire in splendor; others manage on Social Security alone. If the "safety net" is indeed a bit above bare subsistence - well, why not? For one thing, it's a relatively small concession to a sort of national neighborliness. A social compact that binds us together. We're the only advanced country in the world without universal health insurance, and we no longer have the common experiences of the draft or Walter Cronkite every night. Maybe we should keep Social Security. . .
although it won't be much, and it may not go to people who don't need it, and it may even be called something else, there will be Social Security in the future. But you won't be a happy camper if it's all you have to fall back on."