What boots it at one gate to make defence,
And at another to let in the foe?
John Milton, Samson Agonistes, Lines 559-60.
My grandfather on my mother's side worked in small-town New England factories for more than forty years after he returned from World War II. It was precise machine work, carefully done, and it paid relatively well for the town and the job. But there never was much for him to save. He retired at 65, drawing a small pension.
His savings went kaput long ago. He needs his Social Security checks. There's not much to those checks, however; by the end of some months, he has nothing. It has become something of a game for my parents to trick him into taking their money. Day to day, week to week is how he lives on the government checks, in a rusting Quonset hut -- a relic of the war that opened his adult life.
Social Security is not yet in crisis; credit Drum and DeLong for finally convincing me. It can continue in its present form for at least a decade, and likely much longer. But that does not mean that it should. The lack of a crisis is not evidence of success.
My grandfather, after all, is not alone. A person born in 1925 who worked for forty years and retired at age 65 at a decent wage ($40,000) receives just under $19,000 in benefits per year today. This is not a sum on which one lives the high life. Indeed, it's barely getting by -- if it's getting by -- in most of the higher-priced places in the land.
Moreover, the money that our hypothetical retiree receives is not the fruit of an investment. It was not once used to build a factory or buy a new computer or train a new worker or start a company. It was not put into some business, did not grow by the effort of others, and will never pay dividends. It's a simple transfer, a from-here-to-there wire transmission, doing no work along the way.
We need to stop shuffling checks from person to person in a generational trading game of IOUs and paid-in expectations. We need to build a system in which retirees own something -- a stock, a bond, a piece of their former employer -- that is theirs, rather than relying upon the passing benevolence of the voters. And, better, a system in which the money paid in actually does something -- creates a job, builds a factory, starts a company -- that benefits us all. An ownership society, the Das Kapital dream refitted for capitalist clothes, in which the workers do own the means of production.
Privatizing Social Security will entail risks. I will be the first to admit that it can be done poorly and that it will not cure all ills. There are no silver bullets in this gun.
But that's part of the point. The present system is no silver bullet, no too fine thing. Indeed, judged by the standards to which some hold privatization, the present system is an abject failure. Thus, the fact that privatization is also not a silver bullet is hardly a knock against privatization.
The question to ask is whether privatizing a portion of Social Security has the potential to be better than the current system. Frame the question that way -- the correct way -- and then let's have the debate.
UPDATE: Jeremy Osner makes the following observation, which is echoed by several others in the thread:
But: advocates of ownership need to recognize that if you own something, there is a possibility that it will lose its value. Ownership entails risk; social security means a level of risklessness.
Sebastian Holsclaw (who ultimately disagrees with me, it should be noted) makes the point well in the thread, but it bears being made upfront: All forms of Social Security are risky. A significant, long term market failure will cause a private system to fail, the current system to fail, and any conceivable new system to fail. The asteroid strike won't care about the color of your parachute -- to mix metaphor and cliche'.
It is important to remember that, over the long term, the modern stock market has always shown significant aggregate returns. Even for the 30-year period from January 1, 1929 until January 1, 1959 -- a period that encompassed the Great Depression and a World War, among other things -- stocks were a good bet (graph of S&P 500):