Private Accounts Still Make Sense

Why the market meltdown doesn't negate the case for privatizing Social Security

Radley Balko | October 8, 2008

Wall Street's wild ride over the last few weeks has many critics of President Bush's 2000 campaign promise to create personal Social Security accounts dredging up the issue to score points with justifiably frightened voters.

Barack Obama's campaign has used the issue as a cudgel to whack John McCain, who supported President Bush's plan. Embattled GOP senators such as New Hampshire's John Sununu are also finding themselves on the defensive as the issue of private accounts is resurfacing in campaign attack ads.

President Bush deserves criticism for the way he pushed private accounts, but not for the idea itself. He deserves scorn for the awful way his administration argued for the idea; for his refusal to expend any political capital to pass what would have been a historic, game-changing reform; and for the way he abandoned the issue at the first sign that it was hurting him politically. The same goes for Republicans who once supported the idea, but who today no longer have the courage to argue for it.

Private accounts made sense in 2001, and they still make sense today, even after the calamitous last month in America's capital markets.

Bush's plan basically allowed for younger workers to create private Social Security accounts, which they could then invest in a mix of balanced stocks, bonds, commodities, and other financial holdings similar to the way most people invest their 401(k) plans today. It was only part of their Social Security tax, but it was at least a start.

More importantly, the plan would have taken a step toward giving Americans ownership over the money they "contribute" (the government's term, not mine) to Social Security. Within a generation, what you and your employer contribute would no longer go into a general fund that can be raided at the will of Congress, but to a personal account with your name on it. Not only could you then invest that money to yield a (much) higher return than what you'd get from the government, but should you die early, the money you've been contributing for all your adult life would be passed on to your heirs. Today, it goes back to the government.

Had the Bush plan been successful, millions of poor people would have begun to accumulate inter-generational savings that could help their children or grandchildren escape the cycle of poverty. Our Social Security system would not only be sound, it would be more honest. Your contribution to your retirement would be exactly that, as opposed to what it is today, which is a tax on youth used to prop up a Ponzi scheme to provide benefits for the elderly.

So what about that financial meltdown? Wouldn't the carnage we've seen in the financial sector of late have wrecked all of these private Social Security accounts? It isn't likely. The earliest the Bush plan could have been implemented would have been January 2003. The Dow at that time stood at 8,607. Last Friday the Dow closed at 10,325, its lowest point in two years. Even if you had invested your entire account in stocks on the day the Bush plan took effect, and then retired on Friday, you'd still likely have come out pretty well.

But that's not even really an accurate assessment of what would have happened. No one gets his first paycheck five or six years before retirement. And all of the plans for full or partial Social Security privatization called for bringing in private accounts in phases. People already near retirement would have received the same benefits they were anticipating. But younger people would have had 20 or 30 or 40 years to invest, using the power of compound interest to yield returns exponentially higher than the maximum 1.5-2.5 percent you can expect from the government. Even if the Dow drops below what it was in 2003, anyone would have had Social Security funds invested in it wouldn't be retiring for decades.

There's no period in the history of the stock market—including the crash of 1929, the stagflation of the 1970s, the crash of 1989, and the tech bubble burst of the early 2000s—in which a worker who'd been investing for 30 years or more wouldn't have still received a far better return than what he got from Social Security, even if he retired the day after a historic Wall Street dive.

Of course, this is assuming that you'd have invested your entire account in stocks. That isn't the way most people invest—which is to balance the risk in their retirement plans among stocks, bonds, CDs, and other investments given their age, income, and other assets. Even still, most of the plans for private accounts under consideration eight years ago still provided for a safety net to protect those workers who might have unwisely invested their entire account in, say, Enron or Lehman Brothers.

Critics now trying to use the financial crisis on Wall Street to make political hay of the push for private accounts in 2001 also neglect to mention that for all the risk they want to associate with Wall Street, if you're under 40, you're at far greater risk of never seeing your Social Security deductions under the present system than under any privatization plan. Social Security faces an unfunded liability of $4 trillion over the next 75 years. USA Today reported in May that the combined federal liability for Social Security, Medicare, and other government programs for everyone currently eligible is more than $57 trillion, or $500,000 for every household in the country. And, of course, Congress can raid the Social Security "trust fund" at will.

The stock market is risky? The federal government currently has obligations it will never be able to keep. And none of this accounts for trillion-dollar bank bailouts, inevitable wars, or the new entitlements promised by the current candidates for present and future occupants of the White House. At 33, I don't expect to get a dime from Social Security. If you're younger than I am, you shouldn't, either.

President Bush and other Republicans running for re-election today do deserve criticism for the way they handled the Social Security privatization debate back in 2001. Not for supporting the idea, but for failing to muster the political will to pass it when they had the chance.

Radley Balko is a senior editor of reason. A version of this article originally appeared at FoxNews.com.

Comments

Some Guy|10.8.08 @ 3:08PM|#

It'll all be academic in 2017 anyway. It'll be interesting to see what happens when those IOUs come due.

JMR|10.8.08 @ 3:15PM|#

I like to use privatizing SS as one end of an "I don't give a shit about this policy" scale for the Bush Administration. Clearly, a halfhearted effort would be a kind description of the lip service accompanied by very little action that I saw. On the opposite end (the "Bush *DOES* give a shit" part of my scale) would be Iraq war spending, or something like spending lots of federal tax dollars raiding California's pot-clinics despite state law, licenses, local approval, etc.

|10.8.08 @ 3:15PM|#

It'll be interesting to see what happens when those IOUs come due.

Mal: Define interesting.
Wash: "Oh God, Oh God we're all going to die"?

|10.8.08 @ 3:18PM|#

I did not RTFA yet.
If you had started diversified investing 15% of your pretax income in the stock market in 1928, you'd have been doing very well by the time you retired at age 55 in 1963.

Naga Sadow|10.8.08 @ 3:25PM|#

Might have to stay a bartender longer than I thought.

|10.8.08 @ 3:27PM|#

It certainly doesn't negate the principled case for privatizing Social Security.

Politically, however, the market meltdown does drive a stake in its heart, cut off its head, dismember its body, burn its remains, and scatter its ashes to the four winds.

|10.8.08 @ 3:28PM|#

The way to privatise SS without loosing the democrats is to welfare-ize SS. Eliminate the SS payroll tax and increase the income tax. Give every retired person the same amont on their SS check. That amount should be slightly more that the current minimum payment. Raise and index to life spans the retirement age but make SS disability easier for older blue collar workers to get.
The poor will do OK and middle class and rich can make private arragements for retirement income and will make out well becuase the tax will be lower.

ed|10.8.08 @ 3:35PM|#

Private accounts made sense in 2001, and they still make sense today

Problem is, the government in general and the political left in particular has a vested interest in keeping the citizenry beholden to their promised largesse. If you "allow" private citizens to choose the course of their lives and take responsibility for their own retirement accounts, the power of the government is diminished. He who craves power and has tasted it is ever reluctant to relinquish it. Add to this truism another: the left is--and has always been--suspicious of too much independence, too much free will. It's looks as though, in a month's time, they'll have absolute power and they'll be ruling the nation absolutely. Be afraid.

Invisible Finger|10.8.08 @ 3:37PM|#

Politically, however, the market meltdown does drive a stake in its heart, cut off its head, dismember its body, burn its remains, and scatter its ashes to the four winds.

It does. Today.

Two years from now, when all the Fed actions to pump liquidity in the 2008 market turn into inflation and high interest rates in the 2011 market (which is just a few years from 2017) social security checks will look so inadequate people will wish they could have had the chance to put their social security money into some safe CD's back in the aughts.

Assuming the November winner wins 2 terms, said winner will have the same empty-skulled look of despair Duh-bya has today when the 2017 social security crisis hits.

|10.8.08 @ 3:38PM|#

We already have private retirement accounts. They are called 401k's & IRA's. You are free to contribute to them immendiately.

Social Security is a whole different concept. The money you are paying in now isn't your "contribution" for future benefits. Rather, your future benefits are calculated by how long you are in the workforce. Your SS taxes are going to present retiree benefits.

If you want to do away with SS, just do it. But don't bastardize it with "private" accounts.

Naga Sadow|10.8.08 @ 3:39PM|#

Time for another "Pimp my Walker" thread.

Kolohe|10.8.08 @ 3:48PM|#

In the interests of presenting alternative points of view:

Here is a final part of a collection of (50!) posts that present a contrary postion. The others are here(0-23) and here(23-44)

|10.8.08 @ 3:49PM|#

I'd like to second Whisley Tango's post. Social Security isn't nor was it ever an individual contribution for an individual retirement benefit. It's an insurance program; you're betting you stay alive long enough to benefit. Some don't, luckily, so those who do get to benefit from it.

It's a program that benefits society as a whole, not individual investors. (What if you never make enough money to make a meaningful contribution? Screwed huh?) Privatization is probably the worst idea in a long line of very bad ideas concocted by Republican-funding Wall Street fee-mongers.

T|10.8.08 @ 3:54PM|#

Social Security isn't nor was it ever an individual contribution for an individual retirement benefit. It's an insurance program

Horseshit. It's an intergenerational Ponzi scheme. Like all Ponzi schemes, it depends on a constant influx of suckers, I mean new workers, at the bottom to sustain the lucky folks at the top. The breakdown point in that equation is rapidly nearing no matter what anybody says, so we'll see what happens then.

fyodor|10.8.08 @ 3:55PM|#

One of the factors that sunk Bush's plan was the problem of how to make up the immediate SS fund shortfall created by not taking less payroll taxes from opt-ins while maintaining payments to retirees. No one seemed to have an answer for this and the left made hay of it. Radley, unfortunately, doesn't address it either. I must admit I like Floccina's plan for how to address that shortfall and how to placate the left; not sure how it would work regarding earmarking an amount of tax money for workers to invest in their own private accounts, but I imagine that could be worked out. And then maybe people would eventually see that there's no point to the system at all!

fyodor|10.8.08 @ 3:58PM|#

It's a program that benefits society as a whole, not individual investors.

Hmmm. I wonder which am I, an individual or a member of society (as a whole!)? :-)

BTW, the word "not" should be struck from the second line of my post above. Oh, the perils of incomplete re-writing!!

|10.8.08 @ 3:59PM|#

What of the disability side of soc. sec?
no I didnt rtfa.
When my back took a major shit, the 2 disablity insurance companies covering me were able to deny the claim, leaving me nothing. Soc sec. disability is now what I live on. Had the real insurance done their side of the contract, then I wouldn't be relying on taxpayers dollars.

ed|10.8.08 @ 4:02PM|#

It's a program that benefits society as a whole

Forced charity. How noble!

|10.8.08 @ 4:12PM|#

Isn't promising an abnormally high return in a short term a key element of the Ponzi scheme? No one is doing that with Social Security.

|10.8.08 @ 4:20PM|#

"Hmmm. I wonder which am I, an individual or a member of society (as a whole!)? :-)"

You as an individual can invest whatever you like in whatever way you like. You as a member of society are obligated to contribute to the well-being of that society. Or you're welcome to move to Bangladesh and try to make a life for yourself there. Let's see how far your personal ingenuity gets you there.

Brian Defferding|10.8.08 @ 4:30PM|#

Privatizing SS is easy - just give an "opt-out" avenue. If we don't want to pay for SS, take it off our paychecks. It'll solve the future-unfunded claims issue and give us a little more economic freedom for those who want it.

fyodor|10.8.08 @ 4:31PM|#

You as an individual can invest whatever you like in whatever way you like. You as a member of society are obligated to contribute to the well-being of that society.

Huh? First of all, the comment I was satirizing said individuals were never meant to benefit from Social Security, only "society as a whole." The point of my satire was that it's nonsensical to separate individuals from "society as a whole." You've done nothing to elucidate that paradox. Secondly, I invest privately and have my payroll taxes taken from me both as an individual and as a member of society. How can I do anything that's not both?? Individuals are members of society just as society is made up of individuals!

Or you're welcome to move to Bangladesh and try to make a life for yourself there. Let's see how far your personal ingenuity gets you there.

WTF? All I get from that is a generalized spitefulness.

|10.8.08 @ 4:33PM|#

"Forced charity. How noble!"

I take it you never use roads, didn't benefit from public education, law enforcement, or anything else provided by the state (of, by, and for the people in this country). That would be forced charity, and that's bad. If we can dump billions of our money into warmaking, we can make sure the elderly aren't living in dumpsters. That's just my opinion though, I believe in civilization.

fyodor|10.8.08 @ 4:37PM|#

Privatizing SS is easy - just give an "opt-out" avenue. If we don't want to pay for SS, take it off our paychecks.

The political problem is twofold.

One part is that people will cry that opt-outers will fail to save for their futures. Inappropriate paternalism, I agree. But it's a political problem that won't go away however wrong-headed it is.

The other part is how to maintain benefits to current recipients when workers are opting out of paying what those benefits are dependent on. I understand the argument that those beneficiaries have no claim to anyone's money no matter how much they paid to benefit others when they were working. Still, the political problem of shorting folks who spent years paying payroll taxes is enormous. And maybe it's not fair to them, I'm not sure....

|10.8.08 @ 4:41PM|#

We could place responsiblity of the elderly or/and disabled back onto the family instead of government. Isn't that the way it use to be?

|10.8.08 @ 4:45PM|#

Eliminate the SS payroll tax and increase the income tax.

I'll pass. This will exacerbate the current pathology in our tax code, under which the majority of citizens pay no income tax (except Soc Sec).

|10.8.08 @ 4:49PM|#

The first step to reforming SS is to recognize its true "pay as you go" feature. Right now, the "SS" tax generates more than SS needs, and the rest is rolled over into the general fund.

It would be a tax cut now (which is good), and it would make the true cost of SS more apparent (which is good), and would force real SS reform sooner rather than later (which is good), as funding SS would require annual tax increases.

The only downside is that the back-office transfer of the SS surplus to the general fund will cease, meaning either (a) other taxes would go up (bad), (b) the deficit would go up (bad), or real spending cuts would be made (good, but unlikely).

|10.8.08 @ 4:50PM|#

"From each according to his ability; to each according to his needs."

Good shit, huh TQ/Edward?

|10.8.08 @ 4:50PM|#

fyodor,

I apologize for my snarkiness, it's my stock comment to libertarians who dream of a more or less tax-free utopia while enjoying the benefits of our specific tax-funded civilization every minute of every day. So it's directed at this site as a whole and not really any individual posters. =P

All I meant was that SS is mischaracterized as a fund with a one-to-one ratio of paying in vs. getting out. It's an insurance program, and by saying it benefits society I mean of course it benefits certain types of individuals in a way that enhances society for all. By enhancing society I mean promoting MORE individual liberty than would have been possible without such safety nets.

Phool|10.8.08 @ 4:51PM|#

TQ, roads, law enforcement, and education are powers granted to States and the Fed through Constitutions. There ain't one Constitution that says anything about your retirement.

Warty|10.8.08 @ 4:55PM|#

To my eternal shame, I voted for Bush the second time around because I hoped he might destroy Social Security. That convinced me to never vote again.

Phool|10.8.08 @ 4:56PM|#

TQ, nobody is against taxation. Normally, libertarians are just against the coercive nature of the income tax and that those taxes are used for unconstitutional programs.

Go ahead, sales tax me all you need to for a court system, law enforcement, defense, etc. Just don't tax me for your grandfather's Viagra.

|10.8.08 @ 4:56PM|#

The Obvious,

No, I'm not a communist, I believe in a mixed economy, the type that works pretty well for every civilized country on earth. I would not similarly caricature your beliefs as anarchy, though someones I struggle to see the difference.

Warty|10.8.08 @ 4:58PM|#

I take it you never use roads

I drink now, right?

kinnath|10.8.08 @ 4:58PM|#

You as a member of society are obligated to contribute to the well-being of that society.

No, not really. I owe you nothing.

I owe my wife something, because I made promises to her.

I owe my children something, because I helped create them.

I owe my parents something, because they raised me.

I owe my friends something, because we choose each to help other.

I owe my neighbors something, because I agreed to the covenant on the lot I bought.

I owe my employer something, because she pays me.

But this generic thing you call "society", I owe it jack shit.

|10.8.08 @ 5:00PM|#

""" Right now, the "SS" tax generates more than SS needs, and the rest is rolled over into the general fund."""

The last part is the problem. If it stayed out of the general fund it would be in a better shape. I'm not sure having to increase taxes to pay for what we have spent as a bad thing. I don't like having to pay more taxes, but I can't think of a better motivator for the citizenry to keep the governments spending in check. Spend more money, increase taxes appropriately. Isn't that the responsible fiscal approach?

|10.8.08 @ 5:13PM|#

"""I voted for Bush the second time around because I hoped he might destroy Social Security. That convinced me to never vote again."""

Why would you have hope that considering he and a republican controlled congress passed Medicare Part D in 2003? Drinking the Bush kool-aid back then?

|10.8.08 @ 5:16PM|#

kinnath,

I disagree. The thing I call "society" is the set of institutions, laws, economic policy, and infrastructure from which you derive your ability to prosper. You were not born in a vacuum, and your place in this society at this point in history is purely accidental and, some would argue, very lucky. You personally benefit from being born in this society, financially and bodily. Your accidental place and time of birth have vastly more to do with your own prosperity than your personal genius. I know of no moral philosophy that condones taking something and giving nothing in return, except perhaps libertarianism.

|10.8.08 @ 5:18PM|#

I'm a big time libertarian but this article is dishonest or poorly considered. Yes, the money put into a privatized account at the start of a 30 year period would almost certainly appreciate significantly over that time, but most of the contributions would be made toward the end of that period, out of a higher income toward the end of one's career. If I retired this month, most of my contributions over the past 10 years would be wiped out and I would have 30+ percent less money than a year ago.

fyodor|10.8.08 @ 5:21PM|#

I apologize for my snarkiness

Accepted.

it's my stock comment to libertarians who dream of a more or less tax-free utopia while enjoying the benefits of our specific tax-funded civilization every minute of every day.

So you think the only alternative to our level of taxation is Bangladesh? FWIW, libertarians don't believe in utopia and do believe we'd get more out of life to enjoy were we not forced to pay taxes. As for the apparent charge of hypocrisy, that reminds me of a story a friend told of getting gas pumped by an attendant in a very remote area. The attendant told him he was missing his gas cap, but he just happened to have the exact cap for $10. So the friend paid the $10 to get his cap back. He didn't think he was being treated fairly, of course, but just as obviously he had little choice. That's how libertarians feel about accepting the "benefits" of their stolen money. Tell us why we're wrong, if that's what you think, but I think you need more than just your "stock answer" to explain why!

by saying it benefits society I mean of course it benefits certain types of individuals in a way that enhances society for all. By enhancing society I mean promoting MORE individual liberty than would have been possible without such safety nets.

How so?

fyodor|10.8.08 @ 5:24PM|#

TQ,

Are you saying we have obligations to "institutions, laws, economic policy, and infrastructure"?

bob|10.8.08 @ 5:25PM|#

"I take it you never use roads, didn't benefit from public education, law enforcement, or anything else provided by the state (of, by, and for the people in this country)."

if it all disappeared tomorrow wouldn't bother me. law enforcement usually shows up after someone is dead or something is stolen. if public school is so great i should have a better job than the one i have now. those years wasted in school i could have been making money.

johnl|10.8.08 @ 5:27PM|#

SSN privitization is dead. The risk free rate of return is the risk free rate of return. Period. On average, you can beat that by taking on risk. But some folks will lose. And what we have learned now is that losers will all expect to get bailed out.

And a privitization that allows you to invest only in risk free instruments is just Social Security plus a lot of administrative overhead.

Our current system of Social Security plus personal avings in 401k and IRA accounts is nearly optimal. Maybe we should add medical savings accounts that accumulate and roll into 401ks as well. But if we personalize Social Security, the bailouts will never end.

kinnath|10.8.08 @ 5:28PM|#

The thing I call "society" is the set of institutions, laws, economic policy, and infrastructure from which you derive your ability to prosper.

There is no society. There is only a collection of individuals who have some innate rights to life, liberty, and the pursuit of happiness.

You are trying to give a "life" of some sort to a "framework". That framework has no rights of any kind. Period. End of story.

The only purpose of the framework is to secure the rights of individuals.

I know of no moral philosophy that condones taking something and giving nothing in return, except perhaps libertarianism.

I own a house, so I pay property tax to keep the firetruck operational.

I drive a car, so I pay gasoline tax to pave roads.

I donate thousands of dollars to a local charity.

I buy all the insurance I need for my house, my car, my health, and my well-being.

Using the power of the state to force me to "buy" social security "insurance" is an utter infringement on my rights to life, liberty, and pursuit of happiness.

The fact that you think its a great deal does not morally obligate me to participate.

|10.8.08 @ 5:34PM|#

Not sure if that's an apt story. The gas cap was stolen, then the guy had to buy it back in order to get the benefit of the cap. The government takes our money and gives us streets and such in return. It's not like the government stole the street and gave it back only when we paid the tax.

Government does not steal our money, to call it stolen is false. The Constitution gives Congress the power to tax income via the 16th amendment. Income tax is just as lawful and having a rifle under the 2nd amendment. Just because you don't like it doesn't make it theft.

Amendment 16 - The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.

fyodor|10.8.08 @ 5:35PM|#

TQ,

FWIW, one can repay his mythical "debt to society" by being honest and self-sufficient, thereby contributing without taking anything that isn't his.

Warty|10.8.08 @ 5:36PM|#

TrickyVic - no, no kool-aid. I damn sure wasn't about to vote for John Fucking Kerry, and the Libertarian dude was of the silver-drinking variety, and I still thought that I should vote. I think my residual genetic preference for team R took over. Don't worry, that's done now.

TQ - that is more or less Marx's definition of society, right? (note: this isn't an attempt at a GOTCHA!!!!!!)

|10.8.08 @ 5:37PM|#

Our current system of Social Security plus personal avings in 401k and IRA accounts is nearly optimal.

It is not optimal to take 12% of an 18 year old's wages and hand them to a millionaire retiree.

The age cohort receiving Social Security is the wealthiest age cohort in the country. Social Security should simply be phased out and replaced by needs-based welfare straight from the general fund.

If the government wants to continue to force people to put aside 12% of their income for retirement, it can provide tax free accounts with no limits (unlike IRAs) and no employer required (unlike 401Ks). If the government wants to avoid bad investment losses in those private accounts, it can prescribe a menu of age-appropriate indexed funds that must be adhered to.

Social Security is neither.

|10.8.08 @ 5:39PM|#

""""There is no society. There is only a collection of individuals who have some innate rights to life, liberty, and the pursuit of happiness."""

Society is a collection of individuals, which may or may not have rights. You say there is no such thing, then you define it.

fyodor|10.8.08 @ 5:41PM|#

TrickyVic

One can argue all day over the validity of taxation. I see it as a necessary evil for limited, necessary purposes. I think the necessary and legitimate functions of government, which are necessary to prevent anarchy, are about all that justify taxation. But the case for taxation as theft is very strong as people are taxed whether they agree to it or not. That the Constitution recognizes taxation only proves that it is not a purely libertarian document. Anyway, my analogy was meant to mirror every single aspect of taxation (no analogy can ever accomplish that since two phenomena will always differ somehow or else they are not distinct phenomena) but merely to illustrate why libertarians are not hypocrites for believing their tax money is stolen from them while driving on roads and accepting other government benefits. If one accepts taxation as theft, the analogy should help you understand what I intended it to.

bob|10.8.08 @ 5:41PM|#

i never asked for this "society" or "infrastructure" so if i don't show my "gratitude" by being joyous in contributing then sorry to hurt your feelings.

if it all vanished it would lead to a more simple life which i desire anyway.

secondly it is those of you on the left that are always screaming about the malaise of society (global warming, lack of community, inequality, etc).

|10.8.08 @ 5:43PM|#

"""TrickyVic - no, no kool-aid. I damn sure wasn't about to vote for John Fucking Kerry,"""

Was evil harm was Kerry going to do that Bush didn't?

fyodor|10.8.08 @ 5:44PM|#

I too disagree with Kinnath that "there is no society" period, if that's what he truly means.

I would rephrase that to say that there is no society that exists independently of the individuals of which it is made up. Therefore, it is nonsensical to speak of society and the individuals who make it up as different things.

johnl|10.8.08 @ 5:44PM|#

Hey MikeP thanks for using 12% rather than "14%" as is done so often.

Warty|10.8.08 @ 5:45PM|#

He annoyed me, and his middle name is Fucking. Fuck that guy.

But yeah, he would have been better than Bush. Maybe.

fyodor|10.8.08 @ 5:47PM|#

Anyway, my analogy was meant to mirror every single aspect of taxation

Heh, in case it's not obvious, that was meant to read:

"Anyway, my analogy was NOT meant to mirror every single aspect of taxation..."

|10.8.08 @ 5:48PM|#

Society is a useful abstraction of a collection of individuals existing together.

Equating society or the social order with the state or the actions of government is where arguments rooted on society fly off the rails.

|10.8.08 @ 5:50PM|#

Problem 1, already mentioned: if money is being diverted from Social Security to private accounts, how do you make up the revenue shortfall?

Problem 2:

There's no period in the history of the stock market-including the crash of 1929, the stagflation of the 1970s, the crash of 1989, and the tech bubble burst of the early 2000s-in which a worker who'd been investing for 30 years or more wouldn't have still received a far better return than what he got from Social Security, even if he retired the day after a historic Wall Street dive.

Does this count real gains or nominal gains? Consider the inflation-adjusted DJIA. Take my grandfather, who started working in 1945 and retired in 1986. The DJIA was at 15, ended at 25 or so. Over 41 years, that's a return of a mindblowing 1.25% per year. Is that really worse than Social Security? And how well is the market going to look in 2015 when my father retires?

There's a good case to make against Social Security, but forced investing isn't it.

|10.8.08 @ 5:51PM|#

"Equating society or the social order with the state"

Society/government is a pantheistic god. It is the emanation of us and the embodiment of us. It is 'us' personified. And like any decent god, it is above the moral rules place on anything mortal (it's stealing if you do it, it's taxation if the god does it).

|10.8.08 @ 5:52PM|#

"""but merely to illustrate why libertarians are not hypocrites for believing their tax money is stolen from them while driving on roads and accepting other government benefits. """

You and I agree on the issue of taxes, it's a necessary evil to get services, and prefer that they be spent wisely and properly. They should be limited. Of course they should be as low as possible and not necessarily on income. I prefer no income tax, period. Tax the sales of goods.

However I can't not label something authorized by the Constitution as theft just because I disagree. Calling taxes theft ignores the facts. They could be unjust, but not theft.

|10.8.08 @ 5:56PM|#

fyodor,

If we lived in an autocracy and you were taxed, I would agree that your money is being stolen. But we ostensibly are collectively governed, so taxes are collectively agreed upon. Reasonable people can disagree about the extent to which we should be taxed and which programs should exist. But democracy doesn't mean everyone gets everything they want. I don't like that my tax money is used to bomb civilians, for example. But a modern civilization without collective responsibility to some extent is something that makes no sense at all to me. It doesn't exist anywhere, and where it's imposed, it must be done autocratically because no democracy chooses the every-man-for-himself model. Mostly that's because any individual is much more likely not to be a member of the plutocracy that benefits from such an arrangement.

I believe it is inherently anti-liberty to favor individual rights without economic controls and minimum amounts of redistribution, for the same reason that having a stop light at an intersection, while restricting your individual right to cross whenever you damn well please, actually enhances your freedom since it helps keep you alive.

But even more basic than that is that I prefer a society in which those who can't care for themselves aren't left to starve. If we can do it without overburdening ourselves, why shouldn't we? For the sake of a philosophy?

fyodor|10.8.08 @ 5:59PM|#

However I can't not label something authorized by the Constitution as theft just because I disagree. Calling taxes theft ignores the facts.

You seem to treat the Constitution like a Christian treats the Bible or a Muslim treats the Koran. It's pretty good, pretty DAMN good in fact, but it's not perfect, and it's not the word of God or the last possible word on how Americans or anyone else should be governed.

I'm not ignoring facts, you're just imbuing certain information with a Word of God like authority.

Calling taxation theft is not based merely on my disagreement. It is based on money taken from me that I did not authorize or contract to have taken from me. It is taken coercively.

|10.8.08 @ 6:01PM|#

But even more basic than that is that I prefer a society in which those who can't care for themselves aren't left to starve.

What does this have to do with mailing 12% of an 18 year old's paycheck to a millionaire?

|10.8.08 @ 6:05PM|#

It's a program that benefits society as a whole...

Except that "society as a whole" is a collection of individuals, some of whom (net recipients) benefit, while others (net payers) foot the bill.

The best plan for Social Security is to do away it with, today. When a Ponzi scheme is uncovered by some state attorney general, he doesn't insist that the early participants continue to get paid what they were expecting from the pockets of the later participants, he shuts it down and locks up the perpetrators.

The second best plan is to let young people opt out of it completely, as Ron Paul suggests, so it eventually goes away.

If there is a political need to placate those who worry about impoverished older people, remind them that government welfare programs and private charity for the truly needy already exist.

No Name Guy|10.8.08 @ 6:08PM|#

TQ's take....wow.

Insurance, huh? So, how is making it to 67 an insurable event?

Last I checked, an insurable event (in the proper sense of the phrase) was one that happened relatively infrequently in / to a defined group in a manner such that WHO or what in that defined group would be hit by the event couldn't be predicted.

Example - it's known that, on average, over the long term, X percent of homes will burn down in any given year. Determining exactly WHICH house will burn down in any given year is impossible. SO, your home burning down is an insurable event. Let the mathmatical geeks figure out how much should be set aside, yadda, yadda, yadda.....

Given the fact that most people born in 1943, 65 years ago, are still alive, how is it that making it this far in an insurable event?

With all the chatter of moral hazzard WRT the meltdown, isn't SS a sure fire encouragement of moral hazzard? Why bother to save for your own future when sugar daddy Federal Government will send the jack booted thugs of the IRS to extract money from some snot nosed kid flipping burgers for 7 bucks an hour.

Add to that the following: By the time you've reached 65 or 67, you've had your entire life to prepare for that event. It's not like you didn't know it would be coming. So how fair is it, at that point, to stick a gun to the head of the younger generation and say "gimme, gimme, gimme" or blah on about "social contract" or some other bull shit excuse to take other peoples money?

Social Security: Intergenerational slavery by another name.

|10.8.08 @ 6:14PM|#

TQ,

So, are you responsible for bombing civilians? Or just collectively responsible? Do you feel collectively bad about it?

This word "responsible", I do not think it means what you think it means.

fyodor|10.8.08 @ 6:14PM|#

But we ostensibly are collectively governed, so taxes are collectively agreed upon.

Have you ever heard of "tyranny of the majority"? Just because we are collectively governed does not make anything the collective decides to do to the individual justified. The Bill of Rights specifies particular limits and inherently expresses the principle that not anything a representative government decides to do is inherently okay.

But a modern civilization without collective responsibility to some extent is something that makes no sense at all to me.

Well try understanding what we're saying instead of just arguing with us! :-)

It doesn't exist anywhere, and where it's imposed

I'm not sure what "it" is that you refer to, but if it doesn't exist, it couldn't be imposed somewhere, could it?

for the same reason that having a stop light at an intersection, while restricting your individual right to cross whenever you damn well please, actually enhances your freedom since it helps keep you alive

Traffic lights do more for efficiency than safety. Anyway, libertarians do favor a limited government to enforce trespasses against rights, based on the principle that infringements on others' rights creates a forfeiture of one's complete set of rights. Where we differ with Statists is the extent to which the government is authorized infringe on individuals' rights itself. Except for the absolute minimum taxation necessary to run the legitimate functions of government necessary to prevent anarchy, I don't see what rights government officials have to infringe on citizens' rights that citizens don't have to infringe on each others' rights.

But even more basic than that is that I prefer a society in which those who can't care for themselves aren't left to starve. If we can do it without overburdening ourselves, why shouldn't we? For the sake of a philosophy?

I'd rather say it's for the sake of freedom. Freedom of choice, freedom to keep one's possessions and the fruits of one's labor. It's far from clear that we're not overburdening ourselves, especially since much of the burden falls on many of the poorest people. If you don't want people to starve (and I don't blame you!), you can always contribute money to that end voluntarily without forcing others to do so.

|10.8.08 @ 6:15PM|#

...nobody is against taxation...

I am.

|10.8.08 @ 6:19PM|#

If we lived in an autocracy and you were taxed, I would agree that your money is being stolen. But we ostensibly are collectively governed, so taxes are collectively agreed upon.

Incidentally, I vote in every single election I can, and I have never ever voted for someone who has won office. No one in the government represents me. Furthermore, I neither theoretically nor pragmatically accept that being collectively governed means government decisions are collectively agreed upon.

But I am not unreasonable. To show that I am willing to compromise, I will concede that government decisions are collectively forced upon us.

|10.8.08 @ 6:34PM|#

From a strictly objective actuarial point of view, isn't SS both sexist and racist?

http://www.cdc.gov/nchs/data/hus/hus07.pdf#027

Average life expectancy...
Male: 75.2
Female: 80.4

White: 78.3
Black/African American: 73.2

kinnath|10.8.08 @ 6:36PM|#

The Red Hat Society is a collection of like-minded individuals that appear to like dining out in strange attire.

"Society" is orthogonal to "Collection of Individuals". There is more than one society and more than one collection of individuals.

TQ argues that I am morally obligated to contribute to a society that he/she envisions covers the collection of all the residents of the United States of America.

I would argue that the collection of all the residents of the United States of America is not a society. It is merely a geographic collection of individuals with many, many different sets of interests.

As a resident of the good old USA, am I more than happy to buy services from the federal government to protect me from foreign invasion. And I actually like being able to traverse the USA via the Interstate system, so I don't mind tossing in a few pence for that as well.

However, the federal government is stomping all over my rights when it forces me to by a product that I don't want (social security insurance) under threat of imprisonment if I refuse.

That is not being a willing member of a "society".

If you want to argue that I should help provide a safety net for the old and infirm, make that argument. Social Security as it stands now is a crock of shit.

|10.8.08 @ 6:45PM|#

Yo Radley, why are you libertines always trying to privatize social security. Why don't you start local and privatize your local municipal pensions. See how far you get. Ha Ha HA

|10.8.08 @ 6:52PM|#

"Private accounts" is bullshit. The Bush plan was to create yet another government program. What is libertarian about that? Nothing. Libertarians don't want to replace Social Security with so-called "private accounts". We want to replace Social Security with FREEDOM.

Paul|10.8.08 @ 7:58PM|#

older blue collar workers

Define 'blue collar'. Surely you must be indexing by income, right? I make less than a lot of blue collar jobs pay, and I'm white collar all the way.

|10.8.08 @ 9:00PM|#

Why not give the free market a try? Government over-regulation and meddling hasn't worked very well, now has it? Not just for Social Security, either.

Some Guy|10.8.08 @ 9:33PM|#

You seem to treat the Constitution like a Christian treats the Bible or a Muslim treats the Koran.

I've noticed this about many libertarians. I once asked one what he would do differently if he could rewrite it himself. He said he'd leave it exactly as is through the Bill of Rights and that's it.

I noted that it would be strange to leave in the part about not importing slaved past 1800, since we're well past the expiration date. Also, that I wasn't big on the VP being the electoral runner-up. He wouldn't change his position.

I think the Constitution is a mighty fine document, but I don't pray to it.

rdan|10.8.08 @ 9:58PM|#

I noticed most comments did not use the full trustees report as a basis for actual numbers when talking money...without that claims are rather bogus. Andrew Biggs (former SS commissioner) and Diane Lim-Rogers (economist for Concord Coalition) come by and present more than talking points...

robc|10.8.08 @ 10:13PM|#

Politically, however, the market meltdown does drive a stake in its heart, cut off its head, dismember its body, burn its remains, and scatter its ashes to the four winds.

Actually, NOW (or soon from now) would be the best time to switch into a private account. A market meltdown guarantees that we would be "buying low".

|10.8.08 @ 10:21PM|#

I always wondered what happened to TQ. All these years I figured he was just another one hit wonder who dropped of the face of the Earth. I am glad to see he has found meaningful work as a socialist troll on Hit&Run.

|10.9.08 @ 12:02AM|#

TQ sez I know of no moral philosophy that condones taking something and giving nothing in return, except perhaps libertarianism mine.

Fixed that for ya there TQ. After all - your "philosophy" is to take my money and return nothing more than your feeling good about society.

Do you feel good that wealthy old people collect SS checks that are being paid for by poor young working people? If you don't, who should feel good about this?

perilisk|10.9.08 @ 1:19AM|#

@TQ:

What about the current, regressive, SS payroll tax regime would be better than just using a disability-based welfare system paid from the general, progressively-funded tax base? I'm taking left-wing views on social justice for granted, here.

In terms of "social justice", I can still only justify arbitrarily giving money to a group of people when they reach a certain age if it's statistically highly likely that they'll be physically and mentally broken down, or that their education has become obsolete, to the extent that they cannot support themselves, which is true -- but nowhere near universally, certainly not to the extent that the expense of case by case consideration outweighs the savings of payments to those not in need. Obviously, there is some age limit where this is no longer the case. To the extent that the existence of the medical disability claims adjudication office is already given for young workers (and current disability claims consider age in the approval process at any rate), the marginal benefit of blanket age-based approval pushes the theoretical socially beneficial retirement age even higher.

|10.9.08 @ 6:50AM|#

Wow TQ is pretty good.

Welcome TQ, you have made this thread much more interesting than it would have been without you.

Fydor,
Good job rebutting TQ.

|10.9.08 @ 6:51AM|#

Craig | October 8, 2008, 6:15pm | #
...nobody is against taxation...

I am.

Me too

|10.9.08 @ 10:58AM|#

Fydor basically summed up everything extremely well, and tickled me pink mentioning the tyranny of the majority because that's basically what I came to post about.

TQ, there are certain things that the government should not do, regardless of whether or not the people voted for them. For instance, if the majority was a religious group, it then becomes ok to vote against gay marriage? What if it wasn't just gay marriage, and the majority instead voted to say, tax gays more, segregate them, or worse? I hardly think you would agree these things are OK just because the majority voted for it.

Society is a group of individuals agreeing to live peacefully and cooperatively so that everyone may benefit. For individuals, cooperation is a positive sum game. I also believe that any society should strive to maximize happiness, which could be anything based on which individual you are asking. Because the goal is happiness, and happiness varies from person to person, the best way to achieve this goal is to allow everyone to pursue their own happiness. The rights to life and liberty are there because they are necessary to the pursuit of happiness. Moreover, if you are agreeing to live in a society, then it would be absurd to agree to live in one where your individual rights are not respected. For these reasons, even if you do not believe we have innate rights as individuals, the fact that society is beneficial, and society is most beneficial with the enforcement of rights, is reason enough to warrant a respect for rights.

With respect to the role of government, there are two areas where I see government as being necessary. Firstly, it is to protect our rights to life, liberty, and pursuit of happiness. This comes in the form of laws preventing the violation of your rights by others, IE criminal law for the most part. This could also come in the form of some financial regulation aimed at preventing fraud, provided is within the proper scope, assessed not to do more harm than good, and would not be better served by another system or law. This is what I think they meant with the "necessary and proper" clause. We should first make sure the laws are the best laws we could be making to solve the issue at hand, and tailor them to specifically tackle that issue without affecting much else.

The second function of government is one that needs to be scrutinized even more carefully. I think there are some select social goods that could be provided by government better than private business. These instances are very specific and few and far between. For instance, I would not want a private police force, I am OK with public fire departments, and OK with public water as well. However, when saying something should be done by the government it must first pass the tests of "Would this be better done by the private sector or people on their own?" and "Will this new service benefit everyone equally, without violating the rights of some for the benefit of others?". Social Security fails both of those tests, even if it did have some societal merit.

Libertarians are not anarchists. Well, some are. But most are minarchists who believe that government is necessary for the functioning of society, and society benefits everyone as a whole. However government, like combustion, must be focused in a very specific manner, and contained in very specific ways, so that it can yield benefit. Otherwise individuals, and therefore society, gets hurt.

I apologize for the massive post but one final thought for libertarians: Are we all talking about privatization because that is the only reasonable route to take considering our current state, or because libertarians actually support the concept of SS? I mean, from a strictly "role of government" view, I don't see either forced investment in retirement or the current form of SS being the role of government, at least not the fed. Forced investment is certainly better for everyone, and frankly opting out I think is the best method, but it seems that no system at all would be best. I can't even imagine opting into SS. I feel like I'm better off just buying as much gold as I can with my money and burying it until retirement, just to hedge against inflation over the years. At least then I know it will be waiting for me when I'm old.

|10.9.08 @ 2:00PM|#

To say that SS is unconstitutional seems odd, since the very first paragraph includes the clause "to promote the general welfare." The definition and amount of welfare should surely be determined by our representative government, or so it seems to me.

I support the idea of means testing, yes. The operative word is "security," which is an entitlement; more money (you pick the number for the cut-off) for people who are already secure should not be an entitlement.

Some may be willing to allow stupid investors -- or those who never had enough money to invest in a privatized system -- to die in penury. But the US government (dare I say the US society?) is not willing to do so.

So it's much like health care in that respect. We do not allow poor, sick people -- even illegal residents -- to be turned away from an emergency room. (The worst that may happen is that a hospital will surreptitiously bring such a person to another ER, to avoid the cost to themselves, and even this doesn't happen often due to the adverse publicity.)

If you like, don't call it "society," call it investments in common infrastructure. Public schools, transportation subsidies, and a great many other things, also improve the general welfare. It provides the ability and the opportunity to increase wealth, both of individuals and of the country itself.

Think of it as a user fee for living in a place that allows you, and to a large extent enables you, to get rich.

bob|10.9.08 @ 2:50PM|#

jp what you cited is the preamble, it has no standing other than to state reasoning for the document.

the "general welfare" is define by the articles in the constitution, interpretation is not needed.

want to change it see article 7

bob|10.9.08 @ 2:52PM|#

(hit wrong key) see article 5

DannyK|10.9.08 @ 3:26PM|#

Here's something I never see addressed, and I don't think Balko talks about it either. If we're allowing young workers to invest their social security money, where does the money for the Baby Boomers come from? You can't spend the same money twice, and the Baby Boomers are not going to take "no" for an answer when they retire.

Alan|10.9.08 @ 5:00PM|#

RE: You as a member of society are obligated to contribute to the well-being of that society. No, not really. I owe you nothing.

Try skipping out on your taxes and see what happens. Sorry, you do owe. Too bad.

|10.9.08 @ 5:07PM|#

Bob,

I thank you for the correction on applicability of the preamble, but Section 5, to which you directed me, says:

The Congress shall have Power To lay and collect Taxes,
Duties, Imposts and Excises, to pay the Debts and provide for the
common Defence and general Welfare of the United States; but all
Duties, Imposts and Excises shall be uniform throughout the United
States;

So how does this change my argument? Those are the only two mentions of "general welfare" in the Constitution.

I forgot to mention another, unrelated, point. Call me a cynic, but I notice that whether the value of these privatized investments goes up or down, brokers will make a boatload of money on transaction commissions.

Somehow I don't think that's a coincidence. Follow the money.

Cheers,

JP

Alan|10.9.08 @ 5:32PM|#

DannyK:

The idea behind the personal savings accounts is that the current investments, even if they don't go directly to a retired person right now, will eventially pay off by decreasing the government's liability in the future, since the growth in the account will be subtracted from the benifit given upon retirement.

Off the top of my head, you could get the same effect by negatively indexing SS benifits to 401k returns and surpressing increases in the SS tax. This whole sceam was DOA when they launched it, and as noted above, the stake has been driven through it and it is not even "undead" anymore.

From a news report:

Bush kicked off his new campaign by telling a town hall meeting that younger workers should be able to take some of their payroll tax and "set it aside in the form of a personal savings account." Social Security only provides returns of about 2% a year after inflation, and private accounts, says the President, could top that easily if they were invested even partially in stocks. Explained Bush at a press conference back on Dec. 20: "Over time, that rate of return would enable that person to...make up for the deficiencies in the current system...and more likely get that which was promised."

Alan|10.9.08 @ 5:46PM|#

JP, what do you think the odds are that bob has been admited to the bar to practice before the Supream Court?

Maybe he can provide us with some reference to his articles in the Harvard Law Review addressing this issue. I bet Obama was the editor when they were published!

DannyK|10.9.08 @ 6:12PM|#

The idea behind the personal savings accounts is that the current investments, even if they don't go directly to a retired person right now, will eventially pay off by decreasing the government's liability in the future, since the growth in the account will be subtracted from the benifit given upon retirement.

Alan: Right, I get that, it might even be true!

But what about in the short-to-middle run, when all the Baby Boomers are due to retire and the solvency of Social Security might be at risk?

That's what I'm worried about. Privatization would mean cutting revenue but not touching spending obligations. This means either big tax hikes or inflated currency down the road.

On top of the borrowed money for the two big wars and the borrowed money for the ongoing bailouts, I don't think the country can afford to privatize Social Security any time soon. If anybody can explain to me why privatization wouldn't be a medium-term fiscal disaster, I'd love to hear it.

Alan|10.9.08 @ 6:42PM|#

RE: That's what I'm worried about.

Haven't you read any of the libertarian posts? Don't worry! Be happy! The free market will make everything OK!

Phillip Conti|10.10.08 @ 8:32AM|#

The government should NOT be in the business of social security privization whatsoever. Imagine a firm that wants to do a reverse split to alter its capital structure, and joe illiterate calls his senator to complain about how some CEO fat cat is profitting at his expense. Some people shouldnt have bank accounts let alone be in the market. What is the solution? Means test social security, but dont get rid of it.

Martin Brock|10.11.08 @ 4:25AM|#

So if I "save my own money" by purchasing Treasury securities, who pays the principal and interest on the securities? If I "save my own money" by accumulating real estate, who rents it from me? If I sell it on credit, who pays the mortgage? If I "save my own money" by accumulating shares of corporations, who produces the goods my corporations sell to generate my dividends? Ditto for corporate bonds? And why can't productive factors reorganize to escape my corporations' bonds?

Your solution is a chimera. It doesn't solve anything. Capitalism is not a vending machine in which we simply "save our own money" and miraculously receive something back years later. Raising children is an investment in labor that we haven't made, and labor (including intellectual labor) is the most valuable resource according to Ludwig von Mises and Julian Simon. "Saving" is not a substitute for this investment. We can't save without investing. The problem is that we haven't invested.

Productivity enhancing technology is a labor multiplier, so it doesn't solve the problem either, because laborers leaving the workforce to retire take more productivity with them when they exit than they bring in when they enter. Highly productive labor is highly skilled labor, so the most senior workers often are the most productive.

Each year, starting now and continuing for decades, more workers cross into the customary retirement years, over age 65, than enter the workforce, between 20 and 64, and the people leaving the workforce often will be more productive than the workers entering it. That's the problem. "Saving" is not a solution, unless it recaptures the difference between the productivity of the exiting workers and entering workers and then some. It doesn't.

We have this idea that a few smart people increase productivity by inventing widgets that essentially replace human factors of production, but rising productivity typically doesn't work this way. Productivity rises because we all become smarter. A few smart people may seem to contribute disproportionately to this process by providing innovations, but productivity rises only as these innovations diffuse among the rest of us, and we're all continually adding innovations specific to our circumstances.

Social Security was never a substitute for investments like raising children. It was and still is a (very poor) substitute for more traditional elder support. The customary practice that it replaced is not "saving for retirement" but the support of aging parents by their children. Most people never "saved for retirement" in the now popular and naive sense of this phrase. The idea that we can all "save for retirement" essentially is equivalent to the idea that we can all become kings and raise taxes on people younger than us.

The children we didn't have can't pay the rents we'd now like to impose on them, so we'll try to impose the rents of the children we did have, but we'll fail. That's why we won't retire as much as we expect, not because we haven't "saved for retirement". If you're young man and wish to prosper, find innovative ways for older people to remain productive longer ... and raise some children of your own.

|10.11.08 @ 3:16PM|#

Doesn't the massive increase in per capita GDP over the last 200 years blow your Peak Rent argument out of the water?

Besides, in case you haven't noticed, developed aging countries are only now reaching huge pools of new labor in developing nations. Let's talk again in 50 years when every country in the world is where China will be 20 years from now.

Martin Brock|10.13.08 @ 5:38AM|#

Doesn't the massive increase in per capita GDP over the last 200 years blow your Peak Rent argument out of the water?

No. Peak Rent is not the peaking of output. It's the peaking of entitlements to consume that retirees of a given age can demand from workers. That workers are more productive doesn't make it easier for baby boomers to retire for the duration they expect with the consumption they expect, because baby boomers themselves are the more productive workers. Their own declining production as they retire is a big part the problem.

Besides, in case you haven't noticed, developed aging countries are only now reaching huge pools of new labor in developing nations. Let's talk again in 50 years when every country in the world is where China will be 20 years from now.

The population China now ages more rapidly than ours. If a "retiree" is someone over 65 and a "worker" is someone between 20 and 64, the number of workers per retiree in China will fall from over 10 today to a little over 3 over the next 20 years. Birthrates no longer matter at this point, because we're discussing people who have already been born.

Will Chinese workers happily export riches to the U.S. while their own parents starve? I doubt it. The Chinese revere the old as much any culture on Earth. Chinese output will continue growing, but they'll increasingly consume it themselves. They'll even invest their profits in entitlement to the output of U.S. agriculture. We can eat less here, so our rising food prices aren't a catastrophe, but they'll probably continue to rise.

Peak Rent doesn't portend mass starvation, but it does portend shorter retirement than we expect and less consumption of particular goods, like costly health care of dubious value extending lives for very short periods at extraordinary cost. The Chinese may adapt to the latter change more easily, because they don't expect so many pacemakers and bypass operations at this point.