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1) History has shown that means-tested programs are extremely politically vulnerable. No doubt emphasizing this point is in line with your criticism of liberals as preferring a policy of deception, but I feel that there are limits to the extent to which one can ignore political reality when devising policies.
Perhaps more importantly,
2) Means-tested programs tend to generate perverse incentives. If people only get social security benefits when their savings are insufficient, then for people with a limited ability to save, means-testing gives them an incentive to save nothing at all (since what meager savings they could manage would be offset by reductions in their means-tested social security income). Being a liberal doesn't require being totally blind to the need to make certain people have incentives to be economically productive.
Exactly how is this different from the current structure of Social Security? As it now functions, Social Security discourages saving as well.
I address both these points in the paper. Take a look at the paper for the citations, which are omitted here:
[From the paper]
But what about the argument that defenders
of the status quo consider their trump card—
namely, that a means-tested safety net would
not attract sufficient public support to keep it
properly maintained? Again, it bears repeating
that this argument is basically an expression of
contempt for the American electorate. It
assumes, by welfare-liberal standards at least,
that most Americans are less generous and caring
than whoever is making the argument.
However insulting, is the argument correct? Is
there any reason to believe that a decently funded
safety net for retired Americans would be unable
to maintain public support? Perhaps, 70 years
ago, New Dealers had cause for concern about
Americans’ rugged-individualist aversion to the
“dole.” But today? Is disability insurance—
which, unlike the old-age dimension of Social
Security, goes only to people who have suffered a
loss—unpopular? Unemployment insurance?
How about the earned income tax credit? Or disaster relief for hurricane victims?
Yes, it is true that the old Aid to Families with
Dependent Children program attracted plenty of
conservative ire, but AFDC lacked strong public
support because of well-founded concerns about
its perverse effects of encouraging dependence
and illegitimacy. The program was in many ways
too generous in terms of eligibility and benefits,
as is now acknowledged by those who agree that
the mid-1990s welfare reform has been a great
success. But total means-tested non-AFDC/
TANF welfare spending has increased significantly
since the advent of Clinton’s plan to “end
welfare as we know it.”
Despite worries that means-tested assistance
for the elderly poor would be underfunded,
there is at least as much reason to believe that
such programs would be overfunded. The political
power of groups like the AARP, high voter
turnout among the elderly, the desire of middle-aged workers not to be burdened by their parents’financial woes in retirement, and general
sentimentality about the elderly poor could
result in high benefit levels that would create
perverse incentives for savings and retirement
planning.
A system of personal retirement accounts
would minimize problems of perverse incentives
by virtue of the fact that a means-tested safety
net would serve only as an adjunct to the main
retirement system based on mandatory private
savings. Absent a requirement to set aside money
in personal accounts, a means-tested benefits
program for retirees would create a “moral hazard”
problem: workers would have an incentive
to “game” the system and consume their
incomes earlier rather than save sufficiently for
retirement. Well-designed personal retirement
accounts funded over workers’ careers, however,
would simultaneously reduce the moral hazard
problem and, by ensuring that workers have
accumulated assets, diminish the likelihood that
retirees would require assistance in old age.
Even though Social Security is structured almost identically to whole life insurance, it really isn't insurance.
Workers in 1935 had a small chance of reaching retirement age, even though 60% of them did, and lived 12 years after retiring on average.
The noble lie Cato and its Wall Street masters are selling is putting away a few percent of your income will take care of you in retirement.
Putting away 4% of your income for 25 years get you...one year of salary in the bank. Even with 3% above inflation interest applied to these savings...you won't even have 2 years of income saved after 25 years.
The real road to wealth in America is a high income...but the poorest 80% of Americans haven't seen a gain in income in 25 years.
The only people who will get rich under the CATO plan are the Wall Street brokers who will get fees for handling the accounts and the wealthiest 20% of Americans who currently hold 96% of all corporate shares...
Even if Wall Street gets their lackeys to pass a bill that provides for private accounts, there is no guarantee these accounts won't be taxed or opened up to people in times of need...
Public opinion is running overwhelmingly against the privitization of SS...give it up Will.
Um, ok, so maybe you shouldn't retire at 45 then. But save 12% (as in the same percentage forcibly taken via the regressive SS tax) for 40 years and you end up with over 9 times your salary. Increase the savings to 15% and bump the return to a still conservative 4% and you end up nearly 15 times your salary, almost enough to live off the interest indefinitely.
But forget all that math stuff, let's say you're right and only the wealthy can afford to save for their own retirement. In that case, we need a progressive system that transfers wealth from the rich to the poor and middle class, and as Will has noted, Social Security doesn't do that. Its net effect is to transfer wealth between generations, but not between classes. And yet you and the left fervently oppose changes that would actually make the system progressive.
Public opinion is running overwhelmingly against the privitization of SS
Public opinion is also running against the theory of evolution. I guess Kansas has the right idea.
For your next lesson, calculate the fees Wall Street will make by managing 127,000,000 new, government-mandated retirement plans...with minimal oversight, of course.
You are basically saying that people with average income cannot afford to save for retirement.
If that is the case, then what are our options for allowing them to retire? Transfers from rich people in each age cohort will not work. It is mathematically impossible to raise people above the average level through redistribution. Thus, you are left with taxation of the other age cohorts.
However, that assumes that the other age cohorts are large enough and wealth enough to support the retirees.