taking the security out of "social security"

the following was originally posted on Matt's blog
Thursday, February 17, 2005

comments: in bold have been made by me, jenny lynn

"An Ownership Society"
"Topic: Politics"
"Unless you've been living in a bubble, you've probably heard something about the Social Security crisis. According to Bush, we have about 40 some-odd years before Social Security isn't able to pay out all of its promised benefits, unless we overhaul the system. His plan is to create private accounts - privatize Social Security, so to speak - and allow people to put their money into these accounts. These accounts are actually investments in the stock market. The benefits of this are somewhat obvious: investing in the stock market can reap good returns, and it provides an influx of cash into the market - at least when the population goes up. That's the theory anyways.

There's obvious drawbacks as well. The stock market is fickle - and while some can reap some great returns, others can lose their shirts. The stock market also has to increase at over 3% over the rate of inflation for the plan to succeed - and it has to do so for 70 years. The obvious question is can anyone predict economic windfalls for 70 years? And the rhetorical answer - no. As the Daily Show (with Jon Stewart) pointed out - somehow FDR missed the whole internet tech bubble, the lazy fool." great reference... Jon Stewart's interview with Paul Krugman is wonderful and references the Bush social security plan.
(side note: I, jenny lynn, am in love with Jon Stewart.)

I think all of this goes back to a few fundamental questions the are really more important than any Social Security plans or implementations thereof. They go something like this:
1) What is more important, that a person is secure with a guaranteed small income, or that a person is not secure but can potentially have a larger income?
Ok, this sounds alot like gambling. I, for one, suck at gambling. I don't care for the idea of gambling with my social security check.
2) Can the average person - and by average I mean middle class, ~$30,000 to $40,000 a year, full family structure, mom, dad, kids, etc. - keep track of additional retirement planning? (by the way, most Americans don't plan for their retirement worth shit. That's why the wealthier ones hire people to do it for them)
3) Does giving people a stake in their retirement create this idea of an ownership society?

I tend to lean towards secure and small for number 1, and a resounding no for number 2. Which means I obviously tend not to agree with any major overhauls of Social Security. But at the same time, I think el Presidente has something going in the right direction for number 3. People do tend to care more about things when they have something invested in them. I just think Social Security is the wrong thing to make people have that feeling with. Lets face it, your average 20-something doesn't think too much about retirement, and by the time you're 40 its far too late in life to give them that sense of ownership.

So I have a counter-plan (so to speak).When someone is born, have the federal government create a post-graduation account of 2000 bucks. Put it into the stock market, make it privatized, etc. When the kid graduates high school - and they have to actually graduate - they get the money. Or they can keep the account and attach it to their additional Social Security income. While they're in junior high / high school, they can get monthly reports about their earnings. Maybe they can make some sort of financial decisions about which companies get their accounts. What does this do?

1) Get kids thinking about owning something early. 20 years old is too late. We get 'em when they're young.
2) Make kids want to graduate. Don't graduate Timmy? You lose your money; the government keeps it. I guarantee this will keep more kids in school.
3) Allow kids to do something useful when they graduate. Buy a car. Put a downpayment on a house. Pay for college. The possibilities - and influx back into the economy - is enormous.

There's more. I think there's something to this - and I think it would be a plan that conservatives can get behind (ownership society) and liberals (education anyone?) can endorse.
posted by Matt"

In many regards, I am a fiscal liberal. I believe that government has an obligation to provide for me its citizen and can manage my money better than I can. I become conflicted when it comes to big government versus beauracracy. Do social programs require beauracracy? In essence, how much government is too much government?