Dig in his heels?

November 23, 1998

This morning's lead editorial in the Washington Post calls on President Clinton to dig in his heels in defense of the Social Security status quo, to "make clear the ground he will not give." Cato's director of health and welfare studies, Michael Tanner, sees it a bit differently, to say the least:

"Today's Washington Post editorial calling Social Security privatization a 'riverboat gamble' is typical of recent attacks on the straw man of risk. The Post writers know that every privatization proposal before Congress contains provisions for a guaranteed minimum level of benefits. Such provisions remove any risk from privatization-a risk that was minimal to begin with, given historic rates of market return to long-term investment.

"Moreover, the Post ignores the risks of the current Social Security system, a system under which young workers will almost certainly lose money, receiving less in benefits than they paid in taxes. Worse, the current Social Security system is $10 trillion in debt, meaning that taxes will have to go even higher, or benefits will have to be cut substantially, or both. That's the real risk. Far from being what the Post calls 'successful bedrock program,' it is a system headed for collapse."

In addition, you'll want to read Cato's recent study on transition costs involved in moving to a privatized system, by William Shipman. In "Facts and Fantasies about Transition Costs," he notes that "Any valid discussion of the costs of moving to a market-based Social Security system must compare those costs with the costs of maintaining the current system, including the costs of meeting those unfunded liabilities." Thus, Shipman says, "redesigning Social Security as a market-based system of personally owned retirement accounts does not actually entail any new costs. Indeed, moving to a market-based system can ultimately result in substantial savings."

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