Social Security's Progressive Paradox

Retirement "insurance" as a Rube Goldberg machine

Casual observers of contemporary politics could be forgiven for wondering: Where are the goatees? First we had a "conservative" Congress and president pushing through expansions in Medicare and federal control of education that would make Lyndon Johnson blush. Now we have liberal pundits horrified at the notion that President Bush, by proposing progressive indexing of Social Security benefits, would contemplate transforming a universal social insurance program into a de facto welfare program. Progressives decrying welfare? Have we slipped into some strange mirror universe? How long before Al Franken is conjuring man-on-dog scare scenarios to oppose gay marriage?

While mystifying from a policy perspective, there is sound political logic behind the liberal horror at progressive indexing. In part, as John Tierney argued in his New York Times column this weekend, it robs those who oppose Bush's Social Security reform proposals of a potent rhetorical weapon: The image of sad-eyed septuagenarians scrounging Alpo for lunch because their benefits have been cut. It becomes harder, in other words, to cast the private accounts crowd as moustache-twirling villains indifferent to the plight of low-income retirees.

The deeper reason for the opposition, though, is that by laying bare the redistributive function of Social Security, it threatens a key to the program's popularity, what economist Charlotte Twight, in her book Dependent on D.C., has called the "strategic manipulation of political transaction costs." Again, from a pure policy perspective, Social Security makes little sense except as a modest welfare program. There is, after all, no earthly reason why most middle class or wealthy citizens need the government to garnish their wages for decades and then provide a retirement benefit later: People are generally perfectly capable of saving for their own retirements. Those who want to paint the program as indispensable are fond of pointing to the large numbers of retirees who rely almost wholly on Social Security for their incomes. But then, when you take a hefty 12.4 percent bite out of people's paychecks—leaving them with less to save—and tell them they can rely on a government benefit later, it's not exactly shocking that many people don't save and rely on a government benefit later.

Neither is the notion of Social Security as "insurance" terribly coherent, if it ever was. Even when Social Security was first instituted, over half of Americans who reached the age of 21 would survive past age 65. As of 1990 the percentages were over 72 percent for men and 83 percent for women. Aging is not a "risk" to "insure" against; it's a normal part of life to plan for.

But as Twight points out, casting the program as universal "insurance," and payroll taxes as "premiums," was a crucial part of the public relations campaign waged in favor of Social Security. Though the 1960 Supreme Court case Fleming v. Nestor made clear that Social Security was a "noncontractual...social welfare program," the rhetoric of insurance led people to see payroll tax as analogous to the purchase of a benefit, an insurance policy. Citizens were led to perceive themselves as each holding a stake in the system, rather than as simply providing aid to poor retirees.

What worries liberals about progressive indexing, and about the shift to a more overtly welfare-like Social Security system, is that welfare benefits tend to be politically unpopular—and much easier to cut than benefits perceived as universal. Social Security, in other words, is a massive Rube Goldberg device, an ornate and utterly superfluous system of transfers from the middle and upper classes to themselves, the sole purpose of which is to construct—and conceal—a much smaller welfare machine for elderly retirees nestled deep in the guts of the meta-contraption. Some defenders of the status quo are now attempting—though they scarcely seem to believe it themselves—to argue that Social Security is no less vital for the middle class. But corner a progressive over a quiet drink and he'll probably admit that, in fact, the only defensible purpose of Social Security is to ensure that nobody retires in poverty. There may be political reasons for cutting a monthly check to Bill Gates when he turns 65, but there are no sane policy reasons.

The Rube Goldberg universality of Social Security serves a broader symbolic function in the eyes of some communitarian liberals. In a January L.A. Times op-ed, Benjamin Barber defended Social Security as a lynchpin of public life, arguing that private accounts would threaten not just individual penury for old people, but a society-wide return to the Hobbesian war of all against all. This is Barber's trademark hyperbole at work, but the core idea is less insane than he manages to make it sound. Social Security's Rube Goldberg structure conveys the message that we're all in this together: Rather than most of us relying on our own prudence, or on our families, to take care of us, while a few of the less fortunate require public assistance, we will all take care of each other—with the government as the vital locus of our common affection and generosity. Dependence will be not the exception but the norm.

Two symmetrical purposes, then, are served by the Rube Goldberg setup: The narrower policy goal of protecting redistribution to our impecunious elders, and the broader goal of leading people to see themselves as bound together by the loving tendrils of government.

As Cato's Will Wilkinson has noted, however, this is a profoundly undemocratic way to justify policy. It amounts to saying: You must not vote away the otiose features of a program, for you may later be tempted to vote away, or at any rate radically reduce, the features that we support on their own merits. That may be a tenable strategy for Straussian conservatives convinced that the hoi polloi must often be fed a Noble Lie to preserve their support for good policy; it sits uneasily with a self-proclaimed commitment to populism and public reason.

This is the sad irony of the current debate: Most wonks on both the left and the right would probably agree that a modest, means-tested program designed to prevent the elderly from retiring in poverty would be superior to our current Rube Goldberg system. But liberals will block such an improvement, because there's no way for conservatives to credibly promise that, once Social Security is explicitly restructured as welfare, they won't gut it. All of which keeps in place another trademark Rube Goldberg feature of the system: The boot on a lever, kicking us all in the ass.

While mystifying from a policy perspective, there is sound political logic behind the liberal horror at progressive indexing. In part, as John Tierney argued in his New York Times column this weekend, it robs those who oppose Bush's Social Security reform proposals of a potent rhetorical weapon: The image of sad-eyed septuagenarians scrounging Alpo for lunch because their benefits have been cut. It becomes harder, in other words, to cast the private accounts crowd as moustache-twirling villains indifferent to the plight of low-income retirees.

The deeper reason for the opposition, though, is that by laying bare the redistributive function of Social Security, it threatens a key to the program's popularity, what economist Charlotte Twight, in her book Dependent on D.C., has called the "strategic manipulation of political transaction costs." Again, from a pure policy perspective, Social Security makes little sense except as a modest welfare program. There is, after all, no earthly reason why most middle class or wealthy citizens need the government to garnish their wages for decades and then provide a retirement benefit later: People are generally perfectly capable of saving for their own retirements. Those who want to paint the program as indispensable are fond of pointing to the large numbers of retirees who rely almost wholly on Social Security for their incomes. But then, when you take a hefty 12.4 percent bite out of people's paychecks—leaving them with less to save—and tell them they can rely on a government benefit later, it's not exactly shocking that many people don't save and rely on a government benefit later.

Neither is the notion of Social Security as "insurance" terribly coherent, if it ever was. Even when Social Security was first instituted, over half of Americans who reached the age of 21 would survive past age 65. As of 1990 the percentages were over 72 percent for men and 83 percent for women. Aging is not a "risk" to "insure" against; it's a normal part of life to plan for.

But as Twight points out, casting the program as universal "insurance," and payroll taxes as "premiums," was a crucial part of the public relations campaign waged in favor of Social Security. Though the 1960 Supreme Court case Fleming v. Nestor made clear that Social Security was a "noncontractual...social welfare program," the rhetoric of insurance led people to see payroll tax as analogous to the purchase of a benefit, an insurance policy. Citizens were led to perceive themselves as each holding a stake in the system, rather than as simply providing aid to poor retirees.

What worries liberals about progressive indexing, and about the shift to a more overtly welfare-like Social Security system, is that welfare benefits tend to be politically unpopular—and much easier to cut than benefits perceived as universal. Social Security, in other words, is a massive Rube Goldberg device, an ornate and utterly superfluous system of transfers from the middle and upper classes to themselves, the sole purpose of which is to construct—and conceal—a much smaller welfare machine for elderly retirees nestled deep in the guts of the meta-contraption. Some defenders of the status quo are now attempting—though they scarcely seem to believe it themselves—to argue that Social Security is no less vital for the middle class. But corner a progressive over a quiet drink and he'll probably admit that, in fact, the only defensible purpose of Social Security is to ensure that nobody retires in poverty. There may be political reasons for cutting a monthly check to Bill Gates when he turns 65, but there are no sane policy reasons.

The Rube Goldberg universality of Social Security serves a broader symbolic function in the eyes of some communitarian liberals. In a January L.A. Times op-ed, Benjamin Barber defended Social Security as a lynchpin of public life, arguing that private accounts would threaten not just individual penury for old people, but a society-wide return to the Hobbesian war of all against all. This is Barber's trademark hyperbole at work, but the core idea is less insane than he manages to make it sound. Social Security's Rube Goldberg structure conveys the message that we're all in this together: Rather than most of us relying on our own prudence, or on our families, to take care of us, while a few of the less fortunate require public assistance, we will all take care of each other—with the government as the vital locus of our common affection and generosity. Dependence will be not the exception but the norm.

Two symmetrical purposes, then, are served by the Rube Goldberg setup: The narrower policy goal of protecting redistribution to our impecunious elders, and the broader goal of leading people to see themselves as bound together by the loving tendrils of government.

As Cato's Will Wilkinson has noted, however, this is a profoundly undemocratic way to justify policy. It amounts to saying: You must not vote away the otiose features of a program, for you may later be tempted to vote away, or at any rate radically reduce, the features that we support on their own merits. That may be a tenable strategy for Straussian conservatives convinced that the hoi polloi must often be fed a Noble Lie to preserve their support for good policy; it sits uneasily with a self-proclaimed commitment to populism and public reason.

This is the sad irony of the current debate: Most wonks on both the left and the right would probably agree that a modest, means-tested program designed to prevent the elderly from retiring in poverty would be superior to our current Rube Goldberg system. But liberals will block such an improvement, because there's no way for conservatives to credibly promise that, once Social Security is explicitly restructured as welfare, they won't gut it. All of which keeps in place another trademark Rube Goldberg feature of the system: The boot on a lever, kicking us all in the ass.

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  • ||

    As a retiree, I'd like to thank the 3 people whose contributions I'm living off of.

    In a few years, if this keeps up, it'll be 4 to 1, or 5 to 1.

    "... the only defensible purpose of Social Security is to ensure that nobody retires in poverty."

    That's exactly what it was first made for. The retirement age was set at 65 because at that time, not many people lived that long.

    But then, over the years, progressive ideology took over and added all sorts of people to the Social Security rolls, including people who found it inconvenient to work, but were bright enough to manage the system - invented disabilities, "my cousin was a WW I vet", and so on.

    If it went back to the original plan - when you retire at 68 (or whatever the new retirement age will be), you'll get $X per month. Nobody, not anybody, will get a dime - not until they reach 68. And we'll make damn sure that when they die, the payments stop.

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