Tuesday, January 18, 2005

Jonathan Rauch on Social Security

Rauch writes for Reason magazine an intriguing piece outlining social security reform as more of a moral than an economic issue:

(Michael) Tanner (of the CATO Institute) argues that people who own assets behave differently and see their place in society in a different light. Private accounts, he says, would encourage a culture of saving and personal responsibility; they would discourage political class warfare; they may, he argues, improve work habits, and even reduce crime and other social pathologies.

I wholeheartedly agree, and the article is entirely correct that this is a huge portion of the impetus behind the reforms proposed.

There's one point I can't help but be repeatedly frustrated with though, and that's the failure of so many of these pundits to see the spike in the Social Security deficit that the baby boom creates. Sure, it's great for Rauch to point out that "Social Security outlays level off (as a share of gross domestic product) in the mid-2030s.", but what happens in the interim? Perhaps I'm hypersensitive to this issue, because I will be demographically hardest hit by this spike. The period about 10-15 years down the road, when the maximum number of retirees (baby boomers) is coupled with the fewest number of workers in their prime (baby busters) is where the problem lies. The kind of deficits Social Security and Medicare are going to run during this period could be devestating to the economy, and, for people my age, in the prime wealth-building years of our lives. When you break the infinite time horizon down into pieces, you find that this is very much an economic issue, with a nice little icing of positive social engineering.


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