Soft privatization

[Max Sawicky]

> . . . 
> Social Security as it is structured now is a pooling of resources 
> to meet a risk, the risk being that you won't be able to earn a living
> because of disability or age or death (this last case affecting
> the family of the deceased). The second part is that it is 
> pay-as-you-go. I rather like this idea, and hope it is kept.

The vulnerable part of the program is not insurance against
disability, which is generally not addressed in privatization
plans, but the retirement piece.

Since everyone looks forward to retirement, the question
becomes why have insurance rather than saving for persons
who live long enough to retire?  One rationale is
paternalism; people won't save enough or wisely and
bug the rest of us when they are old and destitute.
Another is 'poverty insurance.'  The benefit
formula favors those with relatively low earnings
over their lifetime.  Without these rationales,
there isn't much reason to favor social insurance
over private saving for retirement per se.

> 
> Because demographics would mean that pay-as-you-go would be 
> burdensome, it is partially pre-funded since 1983. The pre-funding
> is a sort of cushion to tide us over the baby-boom hump. .  .  .

The pre-funding is only for a year, nowhere near enough
to meet anything but short-term contingencies.  This was
deliberate, since the program is designed as pay as you go.
The Greenspan commission's mandate was to fund the program
as presently structured, by maintaining 75-year balance,
not to transition to paygo.

Cheers,

MBS