The Freeman's Burden:

To defend the principles of human liberty; to educate; to be vigilant against the ever expanding power of the state.

Wednesday, March 16, 2005

It's time for the Dems to give Bush's Social Security plan a knock-out blow

According to the latest round of polling, the President's Social Security plan is not finding much traction, and for good reason. I have recently pointed out some of the problems with the reform plan; and the Democrats have done a surprisingly good job of mustering opposition and public opinion against the plan. That does not mean, however, that the plan is dead. Today, the Republicans managed to get the ANWAR drilling bill approved mainly along party lines. The same thing can happen to the Social Security scheme if the Dems don't take the next step by making a compelling case to fiscal conservatives and libertarians that the Bush plan is bad news for them too. To that end, I have sent an e-mail to my Democrat representative, Jay Inslee, recommending that the Dems change their line of attack from "the partial privatization of Social Security" to the "partial nationalization of the investment markets." As I pointed out in the March 10th post, the Bush scheme would give government a "foot in the door." They would have a hand in picking investments to be included in the personal accounts, a prospect that is ripe for fraud, abuse and influence peddling. The government would argue, and this is truly frightening, that the maintenance and performance of these accounts constitutes a national economic interest. Whenever a government-approved investment fails to perform or looses ground, the Feds then have a compelling national interest in moving legislatively or through the regulatory process to keep floundering investments afloat or institute price caps, selling freezes or price controls to prevent their constituents from loosing money and, hence, un-electing them. The real danger of the Feds controlling, for private citizens, even a small part of their investment portfolio is that people have an expectation that it is the job of government to protect them from every pitfall that life may hold. This philosophy runs counter to, and is incompatible with, the capital markets that rely on risk and winners and losers to create wealth and generate economic activity. History is replete with examples of governments trying to interfere in this process for the sake of some perceived public good, only to exacerbate the crisis with policies that are inconsistent with the nature of capitalism. In this lies the greatest danger of Bush's private accounts. It is not the danger of people controlling their own wealth, but in government having the power to interfere in the system by which that wealth is created and destroyed. If the Democrats can get their heads around that, which is a stretch given their usual economic disfunction, and make this case to their Republican counterparts on Capital Hill, then this plan should die the slow death that it deserves.


Anonymous Anonymous said...

I don't agree that SocSec partial privatization constitutes government market interference (as long as people decide how their individual accounts are invested, and as long as all investment options are true index funds), any more than a 401(k) participant enables market interference by his employer, who has handed the money over to the employee to invest in a limited set of options (just as the government will with SocSec private accounts).

I don't see how doing nothing will help "reduce state power," which you and I see as an important objective. As it gets bigger and bigger, and as the demographics get worse and worse, SocSec will become incurable. I estimate we have 5 years, tops, to get a grip on it, or we'll be stuck with what we have like Germany and France.


Tom Blumer

6:21 PM  

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