I wonder what type of retirement plans Mr. Kinsley has.

Oh so clever. Kinsley sounds like he needs to go to AA - they will disabuse him of such childish arguments pretty quickly.

jim:

Why? Won't he always be the same no matter what he does?

Remember the mathematical proof that nuclear war with the Soviet Union was a certainty (based on the assumption that the Soviet Union would live forever)? Martin Gardner's article in Scientific American, proving that passing Reagan's tax cuts was a waste of time?

At this point, I'm starting to doubt the Four Color Theorem. That was proved mathematically too.

kinsley strikes me as creepy. he is a sour little man who cares nothing for the future because he doesn't have one. his worst sin is his utter predictability on any subject, and the total lack of anything original to say. i will start listening to his moral pronouncements once he starts being honest about his own situation...

I think that Bush should say in return that Kinsey doesn't understand his plan because his plan "goes to eleven."

I think that Bush should say in return that Kinsley doesn't understand his plan because his plan "goes to eleven."

So why do the Kinsleys apply Meathead Logic to Leftist projects like Kyoto and conclude that we got to impose their solutions RIGHT NOW!?.

Let me establish some bonafides here. I work at a pension system (AZ). I've got a financial background. And unlike some Judd's here, I am exceptionally good at math. I read Kinsey's argument. I discussed it with (Corporate Finance Professor) father. It is not a weak argument that can be tossed aside.

When I set out to analyze the problem, I was trying to figure out how the current levels of Social Security and Medicare benefits (real, not
monetary)could be maintained (not increased) through the baby-boomer future. Someone
has to produce the goods and services that the retired generations want to consume. Given the changing demographics as the baby boomers retire,
the problem is harder to solve. Note that some people consume more goods and services than they produce (children, retirees, convicts, bums.) Call these people "net consumers." Call all others "net producers." Over the next several decades years, the number of net producers and consumers in the United States is projected to fall and rise, respectively. Therein arises
the problem of "saving" Social Security and Medicare at their present levels: i.e., how can a diminishing number of net producers produce
enough to satisfy an increasing number of net consumers. Let me address this question before I address Kinsley's, which is: How can the net consumption of future retirees be increased, over what it otherwise would be, via private Social Security accounts?

To supply internally the current levels of Social Security and Medicare consumption per retiree requires following: (1) the number of net producers must be increased through youthful immigration and delayed retirement; and (2) the amount of net production per net U. S. producer must be increased through productivity increases. (I ignore the possibility of a reduction in consumption by the net producers; that option seems politically unstable to me.) Let's take them one by one.

Youthful immigration is doing its part, though it's illegal and potentially destabilizing, politically. (The potential destabilization is made more potent by the idiot "multiculturalists," for reasons that are obvious to you.) The powerful need for more production is the huge magnet that is drawing immigrants to this country. This immigration will continue; it hasto. The net production is needed.

Delayed retirement has already been decreed for coming generations. With better health care and longer lives, the delay may be made even greater
for subsequent generations.

Productivity increases are high by historical standards and are likely to remain so, provided that capitalism is allowed to do its work with the
minimum advisable amount of regulation and taxation. The biggest source of productivity increases, currently and into the future, is
"globalization." In financial terms, globalization provides the increased returns to capital
invested (abroad) needed to support the net consumption of the retiring generations. In real terms, globalization, in effect, increases the
work force supporting our net consumers, because in return for the investment and technology transfers required, we are taking through future time a portion of the production of potentially two billions of Asians. This is not exploitation; our investment and technology-sharing is sharply
increasing their productivity, and we're taking only our fair share of it.

Globalization has a long way to go. Only a small portion of the available Chinese and Indians, to name two groups, are currently participating. If it continues, productivity increases will remain high for decades to come. Thus, it may be possible, through immigration and globalization, to invest and produce our way out of the "looming Social Security and Medicare crises."

The big threats to this rosy future come mostly from the idiot Democrats, though war is also a worry, since it diverts production to war
materials. What is needed is a substantial increase in immigration of scientifically
and technologically trained foreigners, the better to generate exportable technology and a substantial increase in the scientific and technology training of young Americans, for the same reason. We need less indoctrination of our young in "multiculturalism" and touchy-feely crap
and more education in science and math.

We also don't need the union protection inherent in proscriptions against globalization and increases in tariffs and quotas.

NOW, to Kinsley's point. Will private Social Security accounts somehow help in all this? I don't see how, unless they increase productivity over what it otherwise would be. They only way I can see this happening is as follows: the revenue losses caused by private investment accounts are not fully made up by borrowing, but are offset by reductions in productivity-decreasing federal subsidies.

I have other worries about private Social Security accounts, one of which is that they can, and therefore will be, gamed. If I'm a young worker who believes that it is politically impossible for my government to leave me destitute in my old age, why would I not take the greatest investment risk
(seek the highest returns) in my accounts. If I'm successful, me and mine benefit; if I'm not, the government picks up the slack.

It may be that private Social Security accounts will somehow help solve the problem of maintaining Social Security, but I remain to be convinced by argument. It seems more likely that it will
exacerbate a looming problem, which is the maldistribution of retirement assets. I.e.,
when we take into account inheritance, the baby boomer generation probably has enough assets on which to retire, but these assets are not distributed equally across the retiring population. Some redistribution via
taxation will occur, but current efforts to eliminate the "death tax" will, if successful, cut into that. (I don't know why they characterize estate taxes as unfair. The government is not taxing the person who died "one last time." He's dead! From the moment of his death, he has no wealth to tax. It all belongs to people who didn't earn it. Why should the government shy away from taxing unearned wealth above a certain amount and
redistributing it to needy retirees?)

Brandon:

If return on the privately invested accounts is higher than on the bonds sitting in a drawer in WV then it saves the system money, no?

True enough, but who exactly will be doing the work that generates the profit that creates that higher return?

Brandon: Careful not to get sidetracked into things that don't matter. The point here is I'm forced to pay into a system that is doomed not to pay me back if we do nothing. The option to divert part of that forced savings into something I control -- and has equally a chance (arguably a greater one, but even if not) to pay me back -- is ALWAYS better on its face. The rest of the theoretical rambling is designed to misdirect the argument of who's money it is in the first place.

Brendon - a long and thoughtful post. Couple of points:

"looming Social Security and Medicare crisis" - if I am reading you correctly there is no financial crises for these programs, simply that the relationship between users and providers will be slanted too much toward users. How is this different from the argument that too few workers are supporting each retiree (3 to 1 now, eventually 2 to 1)?

You mention that you are in Pensions. How is the SS situation different that a company that has a grossly underfunded pension plan (besides the fact that the PGIC can come after the company to shore up its pension assets)?

Re the Estate Tax - why should the govt seek to redistribute retirement wealth? Why can't it let people keep what they (or their forefathers) earn and focus its attention on provided support for those whose means are below a certain level?

John,

The moral case for partially or fully privatizing Social Security is indeed stronger than the economic case - at least by my lights. But it is important to recognize that privatization is not necessarily going to "save" Social Security for anyone. Putting money into stocks in 2005 won't do you any good if there is no one to buy those stocks at the price you need to support your retirement in 2030.

AWW,

1 - It's not.

2 - It's not much different. Social Security is a defined benefit plan like most pension plans (401k is a defined contribution plan). But a company with an underfunded plan can't force it's customers to buy products to make up for a pension shortfall. The government can - through taxation.

3 - The government redistibutes retirement wealth because not everyone has the same amount of retirement assets. What you are suggesting is just cutting back on Social Security and paying it to poor retirees through Welfare. That's just a matter of accounting. The potential shortfall would still exist.

Then people should be selling in 2028. Or wait until 2033.

Brandon: as near as I can tell privatization will help Social Security somewhat, by giving the average worker a more balanced portfolio as far as shares of the economy are concerned. If you think of the present system as an investment (stretching the term, I know, but bear with me), then it's an investment in wage earnings only; in other words, the asset base for the present system consists wholly of wages (your employer's match of your payroll tax bill is properly counted as part of your wages.) So the asset base for Social Security and Medicare is really labor's share of the economy,which has been quite stable for many years at about thirty percent. (Kinsley relies on this fact implicitly when he argues that privatization can only help Social Security if it improves growth.) But that share may not be stable going forward. What privatization would do (besides starting the transition from a pay-as-you-go system to an each-generation-fights-it-out-amongst-its-own system) is diversify that asset base from labor-only to partly-labor, partly-capital. Tom McGuire from JustOneMinute has a pretty good discussion of that here, with lots of linkage to poke around in.

Brandon:

If the market crashed as badly as you're suggesting no one would be getting SS anyway.

Brandon:

The burgeoning US population

*Gack* I can't believe I just said that -- Labor's share measured by total compensation is 70%. Capital is 30%.

OJ,

"The burgeoning US population?" If the US population is "burgeoning" then there isn't any financial nor economic reason to change Social Security at all. You've just declared moot the whole discussion. And where did you get a market crash out of what I said?

Brandon:

That's close to right. Social Security could go on as is without facing any internal problems. The financial reason to reform it is because of what the investment does for the economy and because of the superior return on the SS dollars. Using SS money as we do currently is obviously stupid in economic terms.