Soft privatization

John K. Taber jktaber at
Fri Jul 31 15:50:51 PDT 1998

I think we're talking about different things. I don't see redistributiveness necessarily changing either.

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.

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. Alas, it was not quite enough, and perhaps deliberately. One of the objections in the Greenspan Commission Report is that it left Social Security underfunded by .58% if I remember right. Just enough to exploit later. But I digress.

By relying more on pre-funding and thereby less on current taxes, Social Security becomes in part a pension fund. This is quite different from social insurance.

I think that partial pre-funding is acceptable as an expedient. However, it does put a pile of rice out there to tempt a pile of rats. IMO, it means that we will have one hell of a political fight, periodically, to keep social security for the next few decades.

Not to be obscure, the "pile of rats" is from the French child's chant

Tas de rats, tas de riz

Tas de riz tentant, tas de rats tentés

Tas de rats tentés tâta tas de riz tentant.

Seth Ackerman wrote:
> I don't see why the redistributiveness of SS would have to change just
> because the trust fund invests in stocks.
> seth ackerman
> > -----Original Message-----
> > From: John K. Taber [SMTP:jktaber at]
> > Sent: Thursday, July 30, 1998 7:51 PM
> > To: lbo-talk at
> > Subject: Re: Soft privatization
> >
> > Seth Ackerman wrote:
> > >
> > > Do I gather that Doug and some others see equity purchases by the
> > trust
> > > fund as unacceptable? True, there's no urgent need for reform. But
> > isn't
> > > that a more palatable one than tax increases/benefit cuts?
> > >
> > > seth ackerman
> > > FAIR
> >
> > Perhaps not. It moves Social Security away from a broad based social
> > insurance system to a pre-funded pension system.
> >
> > I prefer the former.

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