If we let the half of all Americans who want to opt out of Social Security opt out of Social Security, the ones who wind up destitute and starving in their old age won't just go plop their asses down on ice floes and float away. They'll insist on the rest of us bailing their asses out—they'll insist on getting the benefits from the system "opted out" of paying into when they were young and stupid. Every other senior citizen will be a potential insolvent bank. And we don't need anymore of those.
Personally, I'm in favor of the ice-floes strategy. It's not as though the elderly pose much of a physical threat to our society's stability. The retired can't exactly go on strike. Nor can the enfeebled riot. Thus, I just don't see a good reason for the federal government to be involved in subsidizing them at all.
But back in the real world, Savage's point doesn't really do much in the way of defending the current Social Security system. If we're going to have a welfare program for indigent elderly people, then we should just be more honest about it. Each year's payments should come directly out of tax revenues. Forcing prudent people to make bad retirement investments (paying into Social Security) just wastes resources.
Also, I have question for any and all trolls who like to rant in the comments about my supposed liberalism: How many liberals do you know who want to do away with Social Security?
Commenter jrshipley writes:
The trouble is telling who is and is not prudent. If the measure of success is the rates of indigence and poverty among the elderly, then SS has been a resounding success. I personally may or may not be able to get a better return on the money I pay in, but that never was the point of the system so the complaint seems odd to me. It's always been about reducing the morally shocking conditions of poverty that too many elderly Americans had to endure in the early 20th century, not about maximizing returns for optimally intelligent and prudent investors.
In an case, the dependents:producers ratio is going to increase in the US. The projected shortfalls in SS funds are a symptom of this. My understanding is that though currently insolvent SS can be made solvent by small but politically inconvenient changes: lifting the cap on how much income gets taxed into SS, raising the retirement age, etc. So lets just muster the political courage to fix the system. The poll numbers Savage cites just reflect the misinformation that the system is hopelessly broken. Of course people say they want to opt out when they think it won't be there for them.
IMO the larger problem relating to the impending dependent:producer shift is that per capita health care costs in the US are way out of line with our economic competitors. We need to find a way to bring that way down as the boomers retire. The SS shortfall is peanuts by comparison with the taxing effect on the economy of our current health care system.
My response is as follows:
But Social Security is sold as an investment system. As I said in my post, we should call it what it really is: a welfare system for indigent elderly Americans. And then we should use means testing to stop payments from going to people who don't need them. Ideally, I don't think the federal government should be involved with this at all, but I recognize that the federal-welfare-state genie is probably irreversibly out of the bottle.
Regarding sky-rocketing medical costs, I agree that this is a serious problem. But I'm far from convinced that the federal government is well-equipped to improve the situation by getting even more entangled in the health-care market than it already is. What I do know is that some amount of deregulation could lower costs by allowing people to fix "simple" problems like broken bones or standard bacterial infections without first forcing them to earn graduate degrees in general medicine. A more robust market for basic medical services would facilitate enhanced competition that would increase supply and decrease cost.
Again, if our real concern is people not being able to afford basic health care, then we should just have a welfare program that directly subsidizes the treatment of indigent patients. And, as is the case with Social Security, this is not something I think the federal government should be doing at all. Just about the only national health program I support is the CDC because preventing communicable epidemics is clearly a national security issue. I don't think spending huge amounts of federal money making sure that everyone gets the most advanced treatment possible for their cancer is appropriate.