Thursday, January 22, 2004

Arnold on Social Security

Arnold has a great post on why "transition costs" in social security privitization are phony. His point is that these transition costs exist currently as unfunded liabilities, but because government account is cash-based, and therefore Enron like in its veracity, you don't see this as outstanding debt (although it is a future obligation the same way debt is). All "transitioning" from a pay-as-you go system (what the US has now) to a direct savings system does is make it visible instead of invisible.

A friend of mine argues that management costs would eat up too much of a private SS fund, and he has a good point, so I'm not sure if giving people account control would really make them better off. But it would make it impossible for politicians to increase entitlements further and take the politics out of retirement age, which certainly would make us all better off.


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