Thursday, September 01, 2011


Michael Barone in the Washington Examiner:
Some of society's most intractable problems come not from its failures but from its successes. Often you can't get a good thing without paying a bad price.

A prime example is our public old-age pension system Social Security. It has been completely successful in wiping out poverty among the elderly. Old ladies no longer have to eat cat food to survive.

But we pay some prices for this. One is a lower savings rate. China has a humongous savings rate in part because it has no reliable old-age pension system. People have to save if they don't want to starve.

In the United States we got out of the habit of saving. In the decade up to the financial crash of 2008, the U.S. savings rate fell below zero.

We felt comfortable borrowing on the supposedly ever-increasing values of our houses to support current and sometimes lavish consumption. Now we're paying the price.

But even if our savings rate rises back to the level of, say, the 1980s, it still may be lower than optimal.

The longer-term price any society pays for a public old-age pension system is lower birthrates. Farmers had large families in order to provide additional labor for their working years and sources of income for their dotage. So did factory workers a century ago.

In Western Europe birthrates have fallen below the rate necessary to replace population -- in some countries, far below. The American birthrate has remained, barely, above replacement rate largely because of immigration. But immigration has slumped during the recession and may never return to the 1990-2008 level.

Unfortunately, under Social Security like most public pension systems, current pensions are paid for by current workers. As life spans increase and birthrates fall, the ratio of pensioners to active workers falls toward one-to-one.

That's not enough to support the elderly in anything like the style to which they have been accustomed, unless tax rates are sharply increased. And sharply higher tax rates, as Western Europe has shown over the last three decades, reduce long-term economic growth.

That's the problem, often abbreviated as "entitlements," facing our political system.


Anonymous said...

"Entitlement" means people paid into the Social Security system while they worked (HAD JOBS....remember?)with the understanding they would receive a payout after years of work. If the numbers don't add up properly, change the input figures for the current workers and invest the funds in interest-yielding places. Also, put Capital Hill on Social Security and then watch how effective the system will become.

Carl said...

Anony: They may have had an expectation, but no legal right to the money. In any event, because SS is a "pay as you go" system, the money simply isn't there to hand out to future retirees.

Whitehall said...

The ultimate security in this world is one's family.

I've had five kids, although it has almost broken me financially.

But love every one of 'em!

Anonymous said...

Roy said:
Have said for just over 3 decades that Roe would collide with OASDI. Looks like that train wreck not far away.

Anonymous said...

Why not bail out the poor? When did Republicans stop believing in capitalism and start bailing out incompetent capitalists?

Increase Social Security payments by eliminating loopholes and other tax dodges of GE, ExxonMobil, Bank of America. Increase estate taxes.

OBloodyHell said...

>> Why not bail out the poor?

Look at the freakin' NUMBERS, geenyus.

The vast majority of the actual US DEBT is in the social security Ponzi Scheme, along with medicare/medicaid liabilities.

I'd justify the above, with links, but you aren't about to believe me either way, and the numbers in question aren't hard to find on your own.

You can't tax people that much, they'll move their money elsewhere... Or you'll need to tax such a wide swath of individuals that you'll be taking money from John to pay Paul's SS, and taking money from Paul to pay John's SS.

In case it's not obvious, you CAN move the deckchairs on the Titanic around so as to make them go down LAST. What that WON'T do is to stop the Titanic from going down.

Assistant Village Idiot said...

Providing benefits changes behavior, not because we humans are irresponsible, but because we are wired in generally known and predictable ways. Much of liberal restructuring of society has unacknowledged (and often unrealised) assumptions about the malleability of humans. We will become "better" (in their sense) people because the new order will require it.

If that sounds like a vague version of the New Soviet Man, I congratulate you on seeing what so many others have missed.