Letters

From the June 1997 issue

Boomer Battles

While your instincts to privatize Social Security are admirable, the March articles by Carolyn Lochhead ("Clash of the Titans") and the review of Pete Peterson's scare book by David R. Henderson ("Boomer Blues") were both irresponsible and more like tabloid journalism than legitimate commentary.

Although there may have been 35 workers to one Social Security recipient in 1935, 30 percent of the population was on the farms to grow the food we needed. Now it's 2 percent. It used to take hundreds of men (and horses) to build a road; now two men with a CAT and a loader do more in less time. There used to be hundreds of thousands of telephone operators--now there are essentially none. It used to take 200 hours to build an (inferior) car; now it takes 25. And on and on.

By 2030, because of continuing productivity gains, there will be no need for more than two workers to support each recipient. And keep in mind Social Security recipients are not supported by the money they didn't spend in 1950; they are being supported by today's production of goods and services. That will always be the case; you can't save up production.

It doesn't make any difference, really, whether you invest in the market or otherwise. Overall, production is the key, not money. You libertarians should know that.

Don J. Smith
Rancho Mirage, CA

I was disappointed by the analysis of Social Security in the March issue of Reason. Both the feature "Clash of the Titans" and the book review "Boomer Blues" erred by mistaking macroeco-nomic problems with their microeconomic analogs. Microeconomically, there is much for a libertarian to dislike about a compulsory program like Social Security. However, both articles concentrated (naturally) on the problem with Social Security, namely that the aging of the baby boomers will result in a very unfavorable ratio of workers to retirees, threatening the fiscal soundness of the system.

Admittedly, the trust fund view of Social Security is a myth. However, the articles seem to imply that other plans, such as using the stock market, are true trust funds. In reality, all retirement plans rely on transfer of funds from those presently working to those presently retired. (If you believe there is an alternative, picture cryogenically freezing chicken salad sandwiches for your retirement.)

Therefore, the choice between Social Security and other programs makes no difference macroeconomically with regard to the most important problem. We must transfer from workers to retirees, and there soon will be fewer workers for each retiree, no matter what sort of national retirement plan we have. The only solutions are: 1) investment in foreign countries with different demographics; 2) increased immigration in the future to make up the worker shortfall; or 3) investing in the development of less labor-intensive manufacturing and service provision. Other discussions, while possibly important in their own right, just don't address the vital demographics issue.

Thomas Cunningham
Pasadena, CA

David Henderson replies: Both Don Smith and Thomas Cunningham make interesting and valid points. Neither point, though, is inconsistent with what I wrote. Smith's major idea is that productivity will increase in the future as it has in the past. He's right, which is why the Social Security taxes required to pay for benefits in 2040 will be around 20 percent of payroll rather than, say, 50 percent. Cunningham writes, correctly, that even a retirement fund holding stock would require a transfer from those currently working to those currently retired. But there's a huge difference between the two kinds of transfers.

When I receive Social Security in 2017, the "transfer" will be taxes forcibly taken from some innocent person then working. If I start to cash in my IRA that same year, the "transfer" will come from a company that voluntarily accepted that contractual obligation. This gets back to Smith's point that "you can't save up production." Actually, in a sense, you can. Imagine that Social Security had never been started. Then, from the 1930s on, consumption would have been lower, because the government would not have turned the funds over to old people, and capital investment would have been higher. There would then be a larger capital stock today and, with the same amount of labor, more production.

Exploding Airbags

Brian Doherty arrives at the right conclusion on airbags, but for the wrong reasons ("Airbags and Gasbags," March). He says that "airbags are much more likely to save someone than to kill them" but that people should still have the right to disconnect the bags or, presumably, not buy them at all, out of libertarian purity.

But Doherty's analysis is too shallow. True, airbags overall have saved more than 1,000 lives since 1990, while killing only a little more than 50. However, the relevant question is this: Are there identifiable groups for whom airbags provide little or no extra protection? The answer to that is yes. Data from the National Highway Traffic Safety Administration show that, statistically, children under age 13 are three times more likely to die in cars with airbags than in those without. It may be that airbags pose a "tiny" risk to children compared with all other risks. But it is clear that young people are safer in cars without airbags than in those with them. Those 70 and older get no statistically significant benefit from airbags, NHTSA found. Short people are also at greater risk. Most of the adult drivers killed by the device were around five feet tall.

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