Social Security Confusion
But he's wrong in this paragraph:
Which brings us to the president's proposal for private accounts. I like that proposal for three reasons. First, it will encourage people to save. Second, it will give people choices, and choices are good. And third, it will give more voters a stake in the capitalist system, making them more likely to vote for the sort of pro-growth policies that will improve the quality of life for us in our old age and our grandchildren.
Bush’s plan may not encourage new savings, but only shift savings from one form to another. The new choices it will provide will be limited and may be offset by the government's power to interfere in, or at least influence, the capital markets. And there is no reason to believe it will make people think like capitalists. That's a Marxist position that I can see no justification for. So-called private retirement accounts are more likely to extend the entitlement mentality to stock-market returns—and that would be very bad. On this subject see my Freeman article “No Shortcuts” (pdf).
Hat tip: Jude Blanchette
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Sheldon Richman - 2/24/2005
Tom's points are valid. I said only that it "may not" encourage new savings.
Tom G Palmer - 2/24/2005
But it's not a matter of shifting savings from one form to another. Rather than having 6.2 percent of your income taken from you and dropped into the Pay-As-You-Go system, over which you exercise no control at all and over which you have no ownership rights, you will have the option of putting into investments that you would own. It's not perfect, but it's a big improvement over what is imposed on us now. Since making that choice diminishes your future claim on Social Security, I see no reason that it would induce people to diminish any other savings.
Sheldon Richman - 2/23/2005
People may reduce their 401(k) or IRA contributions after setting up a private retirement account.
John H. Lederer - 2/23/2005
"Bush’s plan may not encourage new savings, but only shift savings from one form to another."
Can you illuminate, please.
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