Monday, November 08, 2004

John Irons and Tyler Cowen duke it out at, discussing social security with more topics to come as the week progresses. Perhaps my language is a bit strong: they seem to be in fundamental agreement that we need some sort of welfare for the elderly, the only difference in opinion seems to be whether it should be universal or means-tested. Both think privatization is bad idea. Although Cowen, being a libertarian has a rather interesting take on it. "I wish to privatize many things, but forced savings [social security] is not one of them."

Cowen seems to have the better half of the debate. There is no real reason to have a universal partial pension. Irons wants to make it into a moral issue about "how we treat our elderly," but if it is means-tested then, at least theoretically, those who don't receive it don't need it. Morally, then, I see no difference. It becomes a technocratic question and administering means-tested programs can be problematic. So that swings us back to Irons. Yet Cowen's point that making it universal makes disbursements regressive is important (although, obviously, it still redistributes); payments out are proportional to payments in, so most of the money running through social security just churns among higher income people. The major problem with making social security a welfare program for the elderly seems to be the same fundamental problem with privatizing it: how do you deal with the transition? Because if it becomes welfare then a class of taxpayers who had been paying in, don't get a pay-out.

And then you realize that Cowen's position is less admirable than you had perhaps thought. The subject of the debate is how to fix social security. Which, to a libertarian like Cowen poses a false dichotomy. Of course, we should just get rid of it! Why force people to save! (To be fair, I don't know Cowen's views on social safety nets). And the solution he proposes, which at first seems so admirable, has the effect of undermining the political constituency for social security. Most taxpayers -- and most politically influential taxpayers -- no longer have an interest in the system which makes it politically easier to get rid of (or cut even more). An advantage of universal programs is that everyone seems to benefit from them, which gives it broad support. And thus those who are supposed to benefit do benefit -- even if it introduces inefficiency. I guess, then, that while I find Irons unconvincing, Cowen is a bit scary. At least, that is, if I've read his remarks correctly.


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