A question for all you who favor what is misleadingly called Social Security "privatization." What do you have to say for yourselves now that the stock market is actually paying a smaller return than the government promises to pay, and has for 18 months? As bad as Social Security is, apart from inflation losses, the system doesn't actually cause people to lose 20 to 50 percent of their initial "investment."
Normally this point would be irrelevant. The point of the stock market is that the people who invest choose to do so rather than spend their money in others ways. Whether they win or lose, it's their risk. And even if Social Security were a willing deal for people, there is no justification for forced savings.
But you privatizers have been plotting for years to institute a new layer of forced savings that would collect money to be channeled into stocks. Imagine how much you fellows would be sweating right now if you had actually succeeded in your policy goals. What if you had persuaded people to put their coercively stolen money into stocks instead of government bonds? Just imagine how great the public outcry would be for a complete bailout of Wall Street.
The much-ballyhooed "Social Security calculators" on your websites are the way you chose to demonstrate the higher returns on privatization. But the scroll-down menu for stock-market returns provides options only for positive returns of 10 to 1 percent. There is no option for a loss of 5, 10, or 50 percent. That means in the current climate, these online calculators are completely useless, even fraudulent. Why do you leave them up?
And don't say that you don't really favor stocks but rather "choice" in where people put their money. The whole sales pitch you have been giving, for years and years, is that your program would cause people to earn more money if they had the "freedom" to invest in stocks with money that has been taxed away. That's the supposed value added of privatization, according to your own writings. That's why Wall Street has been funding these lobbying programs for so many years.
This has always been a highly misleading, even radically unprincipled, approach. One can never know in advance what the returns on stocks versus bonds or any other private investment will be. And by talking about relative returns, you are playing right into the central-planners' hands by pretending that Social Security is an "insurance" program as opposed to a straight tax-and-spend redistribution operation.
The first intellectual duty of any critic of Social Security is to expose the main lie, and reveal that this program is not savings or insurance. But you have obscured that point in order to pitch what you believed to be a sure-fire sales campaign: appeal to people's pocketbooks. But that hasn't turned out very well, has it?
And what you haven't really explained to people is that your privatization plan, which would retain all the coercive aspects of the current system, would require transition costs that run into the many trillions, and accelerate the rate at which the program will appear to be in need of a bailout (diverting money tends to do that).
That aside, notice that the public is already ready to drag CEOs to the guillotine, and this over money that people voluntarily used to purchase stocks. Imagine if the money had been coercively taken from their paychecks and invested in stocks on the promise that at least if they can't spend their money, it can be invested at a high return? Investors would be out for blood, even more than they are now. And who are people going to blame but the "libertarians" who agitated for this program in the first place?
And don't talk to me now about the inherent risk of every investment. It's fair to say that people should offer up the losses of investments that they choose. But so long as you retain the coercive aspects of the program — forcing people to fork over money to the government instead of spending it on themselves and their families — you bear some moral culpability for what happens to the money after it is stolen.
And don't tell me that while privatization isn't perfect, it is a good step in the right direction so should be pursued. In fact, it is a step in the wrong direction that will further tar the idea of markets and privatization with potentially catastrophic consequences. There are better approaches. Lower the Social Security tax. Lower any tax. Expand tax-free savings. Allow people to opt out altogether in exchange for giving up future benefits.
All these approaches are consistent with market theory and practice. Privatization as it emerged over the years within the policy set is not. In any case, all of you set yourself up for this fall. You have asked Americans to compare returns on stocks as versus Social Security. Incredibly, after all the millions you have pumped into propaganda, and all the political compromises you have made to keep your guys on Social Security commissions, the end result is to make the government look good by comparison.
That's hard to do. Great going, guys. Now it's time to either take down your calculators, or perhaps make them reflect reality and license them for use by the Social Security Administration.
July 22, 2002
Llewellyn H. Rockwell, Jr. [send him mail], is president of the Ludwig von Mises Institute in Auburn, Alabama, and editor of LewRockwell.com. On Social Security, he highly recommends The Roots of the Social Security Myth by John Attarian and The Revolution of 1935: The Secret History of Social Security by Gregory Bresiger.
Copyright © 2002 LewRockwell.com