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COLUMNISTS
TODAY'S STORIES
28.07.2008
Behind the Times

 The New York Times, summarizing John McCain's stance on Social Security:

He said he favored offering private investment accounts to younger Americans, though it was not clear that investment accounts alone could address the financial shortfall that the retirement system could face in coming decades.

News accounts are constantly saying something like this. It's one of those phrases that seems to be programmed into the computer of every reporter who ever touches on Social Security. But it's wildly inaccurate. Private investment accounts do not improve solvency at all. They make it worse.

Look, it's pretty simple. If you let younger workers divert some of their Social Security tax dollars into private accounts, then that money is not available to pay for regular Social Security benefits. So for every dollar of private accounts that would be created, another dollar of benefits has to be cut just to stay even. If the only element of your plan is to create private accounts, which is the case with McCain, then your plan worsens Social Security's finances.

I think I've made the following analogy before. Suppose my "plan" for saving Social Security consists of building giant gold statues of President Bush throughout the country. (Maybe the theory is, I don't know, that the statues would make future retirees more patriotic and thus more willing to accept lower Social Security benefits.) If newspapers reported on this plan, would they say that "it's not clear that the statues alone could address the financial shortfall that the retirement system could face in coming decades"?

--Jonathan Chait

Posted: Monday, July 28, 2008 12:00 PM with 7 comment(s)

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propositionjoe said:

If newspapers reported on this plan, would they say that "it's not clear that the statues alone could address the financial shortfall that the retirement system could face in coming decades"?

No--the papers would link you to paganism and idolatry and then explain why Democrats have a hard time winning over values voters and church-going Christians, especially those Reagan/Hillary Democrats in the Heartland and Rust Belt.

July 28, 2008 12:33 PM

emigdio said:

oh chait, such a tease! when are you going to start that cult so we can join it?!

July 28, 2008 1:20 PM

rozenson said:

"it's not all too clear how Mr. Wilkes Booth's bullet alone saved Abraham Lincon's life."

Emigdio -- I'm game.

July 28, 2008 1:38 PM

lymon1 said:

Doesn't Obama's "opt-out" plan to make 401(k) investment automatic unless workers opt-out have the same problem?  (For the record I think it's one of Obama's best proposals).  You increase savings but you take more money out of social security tax.  How would Obama make up the difference?

The same way they all do: screw the next generation with lower benefits and higher retirement ages while continuing to pamper retiring baby boomers.  Of course in this case Obama is screwing his own generation.

July 28, 2008 2:29 PM

ejbenjamin said:

Lymon, McCain's plan would deprive the system of several orders of magnitude more money that any plan which encourages 5% (or whatever percent) pre-tax savings.

I agree with you on the larger point, though, which is that boomer entitlement is going to cripple the program.  A mild benefit reduction and a higher retirement age, both phased in over the course of a couple of decades, is needed.

July 28, 2008 2:59 PM

cthulhu2008 said:

The base of the pyramid will expand regardless until it collapses. And oh noes, we can't possibly think 30 years ahead, thats like, 7 election cycles. Or one solitary generation if you want to this economically.

July 29, 2008 2:55 AM

three putt said:

lymonand ejb:   If you're that worried about the boomers drawing too much money from ss you must have been really outraged when the boomers were(and are) pumping billions into it to support the "greatest" generation that put next to nothing in, and has enjoyed the finest retirement in our country's young history.

July 29, 2008 11:44 PM